US dollar index holds near 20-year high hit last week

As another trading week kicks off this Monday, the US dollar index remains near the nearly 20-year high hit last week. The global picture offers plenty of reason to worry: the war in Ukraine and the Covid-19-related lockdowns in China cast long shadows over the growth prospects of the global economy, exacerbating the current inflation problem, intensifying the energy crisis, and aggravating delays in the supply chain.

This scenario is naturally favorable for the dollar, due to its safe-haven appeal in times of greater uncertainty, in a dynamic aggravated by the Fed’s determination to control inflation by raising interest rates, which contrasts with the resistance of other central banks to tighten monetary policies.

US Dollar index price chart

Europe Stock Markets

Stocks fell modestly in Europe on Monday, following a mixed session in Asia, after disappointing data from China dented market sentiment overnight. European benchmark indices trimmed some of the gains posted late last week as the downtrend maintains an unpredictable trading environment for investors.

With sentiment weighed down by monetary tightening, poor growth prospects, and geopolitical risks (especially following Finland and Sweden’s push to join NATO), it remains very difficult for investors to identify how far equities may fall. This week is likely to remain volatile for risk assets. Investors will look to Wednesday’s G7 finance ministers meeting for guidance, as well as speeches from several Fed speakers, plus CPI data from the EU and UK, while China will decide on interest rates on Friday.

The DAX-40 index continues to trade above its first immediate support at 13,900.0 points, despite today’s slight pullback. A bounce above that level could quickly push prices towards their latest high around 14,080.0 points.

IBEX 35 down

The IBEX 35 found support last week at 8,110 points from where it corrected upwards and during Monday’s session it tries to revisit the 55-day exponential moving average at 8,441 points. A little higher is the 200-day exponential moving average at 8,549 points, which could also act as resistance for the index. 

However, the most relevant resistances for the index are at 8,800 points and 8,900 points, which is the maximum for this year. On the downside, last week’s low of 8,110 points could act as support again, but the 8,000 zone could be better support for the index as that is a whole number level. At the beginning of the session on Monday, the Ibex 35 rises 0.30% and is one of the few that remains in positive territory in the region, along with Italy’s FTSE MIB. The stock that has risen the most on the Ibex 35 at the beginning of this Monday is ArcelorMittal, with a gain of 3.06%.

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