Dollar Index: Updates and Risks

Our research and analysis for currencies for the holiday shortened week. We look at Dollar, Chinese companies weathering the selloff, USDCHF charts, AUDUSD - possible trend change and quick report on our trade copier.

Dollar Index: Downside is opening up

Dollar index has turned down from breakout levels. This is a bearish formation and targets 94 as next target.

Reflecting this, USDCHF has already fallen 150 pips from its highs. USDCHF is a proxy to the dollar index and the swiss often leads the dollar moves. Its very rare for the dollar to rally without support from USDCHF. So the falling USDCHF supports our view that dollar is in for a heavy selling into 2019. However iif USDCHF moves back above 1.01, we could see dollar race above 100 this time.

The AUDUSD is a commodity currency. We see commodity currencies to pick up into year end on a wave of short covering and also weakening dollar. The Chinese defense of the 7.000 level in USDCNH has given much support to AUDUSD floor at 7000.

GAS companies in China seem to be easily weathering market volatility

Trade tensions and economic weakness have driven most mainland Chinese companies listed in Hong Kong lower this year. Less than a third of stocks in the Hang Seng’s mainland-focused HSM 100 index are in positive territory for 2018. Among the gainers, however, are gas distributors such as China Gas Holdings , 2914 -1.16% with a market cap of $16 billion, and smaller rivals China Resources Gas Group , 1193 +2.13% ENN Energy Holdings 2688 -0.29% and Kunlun Energy Co. KLYCY 0.71%

The Bitcoin has been at 6500 for over 3 months and now suddenly falls under 4500. This is a stop hunt move with no drivers or reason. We believe the contracting nature of those candles is suggestive that this could be one final push down before it moves to 10000. The 10k mark is the highs from the last 6 months. A test is very much on the card as the last of the enthu bulls are wiped off.

Corporate bond yield have been constantly rising 2018. General Electric Co. is one high-profile company with a lower investment-grade rating that has struggled. Yields on GE bonds due in 2025 have soared this year to 6.4% from below 3%. What happens in the corporate bond market has wider implications, since rising credit spreads can feed through to the rest of the economy. Morgan Stanley analysts say a sustained 1 percentage point rise in triple-B credit spreads tightens U.S. financial conditions as much as a 0.6 percentage point interest rate increase.

The rising FED rate is the real kicker which is leading to a lift off in yields around the world.

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