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
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