Dollar Consolidation?

Macro Perspectives: Tue 7 Sep 2021

Following Labour Day weekend yesterday, the week ahead is mostly non-US macro data, and therefore there is little news to affect equities. However, any surprises from ECB on Thursday could be reflected in DXY, as EUR is 57.6% of the basket.

This view of an interim stock top soon is supported by the increasingly volatile rotation and divergence in indices. Although SPX and NDX made new all-time highs this week, the DJI and most other global stock markets made a lower high reflecting a lack of inherent and sustainable strength. And yet, as previously discussed in my notes, Friday’s 235k miss should ironically serve to delay this retracement a little longer and probably see some diverging indices spike to new highs.

In fact, Friday’s NFP is the perfect set up to get the market long and wrong as pundits rashly shift their Taper announcement forecasts to at least November and stocks break higher into a front running reversal before the September 21-22nd FOMC.

Similarly the NFP disappointment should serve to prolong the major Dollar consolidation bottom further.