U.S. Stock Market Drives the FX Price Action

FXOpen

The USD keeps falling across the dashboard as the stock market’s bid tone continues. With both the Dow Jones and the S&P500 close to making new all-time highs, the USD’s offered tone is likely to continue this week.

Summer trading conditions are often responsible for such tight correlations. The USD is offered against the EUR, AUD, CAD, GBP, NZD, and even against the JPY. The USD swap lines made available by the Fed at the start of the financial crisis and kept open ever since, are a reminder to the investing community that there are plenty of USD available. As such, the dovish tone behind the USD has a sound explanation.

U.S. Stock Market Drives the FX Price Action

The strong interest in the stock market is also responsible for the flight out of the USD. The central banks’ actions during the coronavirus crisis led to lower yields across the curve. Investors looking for yield fled the fixed income and began bidding for stocks.

Fractional shares investing led to another wave of stock market participants. Retail traders can invest any amount in the stock market, even though they cannot buy one full share. Fractional shares investing makes it possible for retail traders with small accounts to participate in the price action of companies like Amazon or Tesla.

The fiscal stimulus in the United States also created a strong interest in the stock market. Americans received $600 weekly checks, and many of them used the new funds to open a brokerage account and trade financial markets.

The stock market is a leading indicator of the business cycle theory. If it signals the bottoming of the US economy, then the bid higher is likely to keep influencing the USD moving forward.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

Latest from Financial Market News

Weekly Market Wrap With Gary Thomson: NIKKEI-225, USD/JPY, GBP/USD, USD/CAD, Gold Weekly Market Wrap With Gary Thomson: S&P500, USD, SNB, TSLA A Yen For Volatility: US Dollar Surges as Japan Ends 8 Years of Negative Rates Weekly Market Wrap With Gary Thomson: US500, USD, US Inflation, USD/JPY Australian Dollar Volatility Ends in Lull Ahead Of US Data

Latest articles

How Do Grid Trading Strategies Work?
Trader’s Tools

How Do Grid Trading Strategies Work?

Grid trading stands as a distinctive strategy within the trading realm, offering a structured approach to navigating market volatility. By strategically placing buy and sell orders at predefined intervals, this method eschews the need to determine the market direction, instead

Weekly Market Wrap With Gary Thomson: NIKKEI-225, USD/JPY, GBP/USD, USD/CAD, Gold
Financial Market News

Weekly Market Wrap With Gary Thomson: NIKKEI-225, USD/JPY, GBP/USD, USD/CAD, Gold

Get the latest scoop on the week's hottest headlines, all in one convenient video. Join Gary Thomson, the COO of  FXOpen UK, as he breaks down the most significant news reports and shares his expert insights.

  • NIKKEI-225 Analysis Indicates Possibility

Forex Analysis

Commodities and European currencies Test Key Supports

On the eve of the Easter holidays, the main currency pairs have slightly slowed down the development of the main trends and are consolidating near key ranges, the breakdown of which could provoke a change in the vectors of medium-term

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 65.68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.