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Hello traders,
We have seen a sharp drop on stocks recently, especially on Monday when investors moved to “safe-have” assets because of fast covid spread. However, moves have probably a lot to do also with inflation and tapering if you ask me. At the same time we see this a healthy, needed set-back before market may resume back to the upside; prices just trying to catch a breath here. What is interesting today is that stocks are trying to erase some of the losses from Monday, which BTW is very normal and common when you have sharp flows on Monday, I very rarely trust them. So now stocks are recovering, but USD index is also still trading higher as well. So what’s next?

Well, I think that regarding the price structure, the most important at the moment is the structure on DXY. Notice that index is coming impulsively higher from 89.50 May low with current price already seen in a fifth wave. In fact, fifth wave looks like a potential wedge that came out of a triangle with price now approaching May 93.43 resistance. Technically it’s a perfect combination for a potential turning point by the end of the month/early August.



Now the question is, on which market or FX pair we shall focus if DXY is really moving into a strong resistance? My answer is USDMXN after The Bank of Mexico raised retest back in June. Technically price is also approaching a triangle resistance now. For full analysis click here

What about stocks? Well, they can be even more attractive and bullish if DXY will come lower, even if just temporary for a correction.

Trade well,

GH

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