FXEmpire | April 5 2013 12:06 EDT
The US Dollar Index shot straight up in the air during the session on Thursday, breaking all the way to the 83.50 level. However, by the end of the session we saw the market turned back around and form a massive shooting star. Quite frankly, we had a massive stimulus edition come out of Tokyo during the early hours of the session, so we really don’t know how to read this market as it wasn’t certainly been influenced by that. Nonetheless, that is a very bearish sign that we are seeing and it does in fact suggest that we could see more weakness.
We still believe in the overall strength of the US dollar as a whole, but with the begin Nonfarm Payroll announcement coming out today, there is a high chance of volatility in this market. We do however see the 82 level as being very supportive, so it’s very possible that we could see this area for the market back up and over.
Most of the pundits out there will tell you that a strong Dollar bad news for the stock market, but we are in a situation now where money is running from other places in hiding in New York. This is because the US economy is actually going forward, albeit lightly, but it is stronger than most others. With that being the case, and the fact that bond simply do not yield anything in an environment that central banks are buying them, money is finding its way into dividend paying stocks in the United States. This is why the Dow Jones Industrial Average done so well and we believe that this theme will continue to play out for the foreseeable future.
There is also talk of the Federal Reserve possibly curbing back on some of the asset purchases that it is been involved in by the end of the year, and if that’s the case the US Dollar should continue to strengthen as many of the other world economies are just now getting around to doing more asset purchases, take as a perfect example the Bank of Japan. Going forward, we believe that buying dips in this market will continue to pay off, especially if we stay above the 82 handle.
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Originally posted here