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Last week culminated with the so-called quadruple "witching day"

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Miguel A. Rodriguez
Miguel A. Rodriguez
05 November 2022
The third Friday of this quarter's last month is when futures and options contracts for indices, stocks, currencies, etc., expire

It is a day in which market movements are caused by flows of position adjustments rather than fundamental reasons, which is why they tend to be more volatile than usual. 

So, the market behaved to a certain extent with ups and downs in the stock indices finally ending with marked losses as it did Nasdaq, which dropped more than 1%.

 

Falls with weekly closes are approaching the primary support at 15,157. A drop below could be jeopardizing from a technical analysis point of view. The daily RSI indicator has broken down from the previous overbought zone and is in neutral territory with room for further declines.

Unlike the previous days, these losses in the American stock markets, which were partially transmitted by correlation to the European indices, cannot be framed in a context of increased aversion to risk regarding the slowdown in the Chinese economy. Moreover, the portfolio adjustment flows, and the new wave of sale of US Treasury bonds with the consequent rise in yields contributed to the losses. The US 10-Year Treasury Bond yield reached 1.38% ahead of the publication of the CPI figures.

This movement is not typical of a risk-off scenario, pointing to expectations of prompt action by the Federal Reserve on the beginning of the withdrawal of monetary stimulus.  This week, on Wednesday, the Fed's Monetary Policy Committee meets, making all the market glances at Powell's speech.

In this sense, coinciding with this kind of market movement, the US Dollar also strengthened significantly against its counterparts, including the Japanese Yen and the Swiss Franc.

The upward pressure on the US dollar led the EUR/USD pair to fall closer to the 1.1660 support zone; the minimum reached at the end of August. From a technical analysis point of view, a close below opens the way to further declines, with the first target around 1.1490.

 

Sources: Bloomberg.com, reuters.com

This information/research prepared by Miguel A. Rodriguez does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views and consequently any person acting on it does so entirely at their own risk.The research provided does not constitute the views of KW Investments Ltd nor is it an invitation to invest with KW Investments Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.The research analyst in not employed by KW Investments Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation, or particular financial needs before making a commitment to invest. The laws of the Republic of Seychelles shall govern any claim relating to or arising from the contents of the information/ research provided. 

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Miguel A. Rodriguez
Miguel A. Rodriguez
Financial Writer

Miguel worked for major financial institutions such as Banco Santander, and Banco Central-Hispano. He is a published author of currency trading books.