Stocks and Dollars rise; what to expect next?

Stocks and Dollars rise; what to expect next?
Ahura Chalki
Ahura Chalki
Published on: 03.01.2023 13:03 (UTC)
Post reading time: 2.01 min

USD index Key pivot sits at 107.00

US futures raised on Monday and continuing that on Tuesday so far, while we are waiting for a busy week with Fed minutes on Wednesday and NFP numbers on Friday. On the other hand, investors and traders will watch the Purchasing Manager Index across the week from the most developed economies. 

Published data on the first trading day of 2023 showed that manufacturing activities in almost all EU members are under the expansion level of 50. December manufacturing PMI in Eurozone recorded 47.8, in line with market expectations, but for the sixth consecutive month, it is below 50. Germany's manufacturing PMI printed at 47.1. France's PMI recorded 49.2, slightly better than market expectations and the previous value of 48.9, but It remained below the 50-level for the fourth consecutive month.

On Tuesday, we had China Caixin Manufacturing PMI for December. The actual Caixin Manufacturing PMI of 49.0 was better than 48.8, and the November number of 49.4. It was also the third consecutive month below the 50 expansion level and the eighth month in 2022 below 50. Later today, we are waiting for German employment numbers and Inflation, while UK and US manufacturing PMI also is due to release. 

On the bond markets, United States 10-Year rates eased to 3.8224%, a sign of lower inflation expectations and a cheaper USD dollar. At the same time, it can help the Stock markets and Gold bulls. 

As it seems, weaker economic activities can keep central banks from more tightening policies. However, the reflection of Earlier tightening policies will be determined in the coming months, especially in the earnings reports of the fourth quarter of last year, which will be published this month. Therefore, while less hawkish policies will support the stock's rising prices in the short term, company earnings and fewer sales and demands can also pressure the bulls. In short, if we do not expect a decline, we can not expect a sharp increase in the first months, even if they can receive some threats. 

2023 for the US Dollar index can not be as good as 2022, but we should not expect any sharp decline, especially in the short term. From the technical point of view, the Dollar Index is trading in a clear downtrend in the daily chart. 20 DMA at 104.35 is the critical level, but the Key pivot sits at 107, and trading under this level supports deeper levels. Breathing above 107 also can change the market trend.