Dollar Pares Losses

In a day marked with virtually no major macroeconomic releases, the US Dollar found support from both sides of the Atlantic. In Europe, various ECB officials were heard remarking that the European Central Bank's asset purchase program could be expanded to account for current conditions. In the US, St. Louis Federal Reserve President James Bullard noted that there was a chance of a rate hike in October during an interview while lambasting current market cheerleading. However, despite the currency markets reacting to the verbal talkdown, according to CME futures, the Fed Funds rate was pricing in a 50% probability of a rate hike in January 2016. For the near term, comments from the Fed and ECB officials highlighted the diverging monetary policies. EURUSD which has weakened notably since Friday, declined a further -0.88% yesterday to close at 1.1189.

US equity benchmarks closed in the green yesterday with the S&P500 futures gaining 0.65% to close at 1974. While concerns about the future of earnings for American corporations remains in doubt as most of the gains have been fueled by buybacks, stocks have nevertheless been buoyed by the Federal Reserve’s postponement of interest rate normalization. However, the more medium-term bias remains to the downside after the break of the rising trendline. The next main lower support level at 1923 is currently awaiting for a retest on a break of the immediate support at 1961, the level from which the S&P500 equity index opened yesterday. To the upside, resistance is sitting at 1982 and a potential break above this resistance level could see a renewed bullish momentum overtake the equity markets. But from the technical perspective, the shooting star candlestick pattern shows a potential decline to the downside in the near-term.