Monday, 26 August 2019 05:43 GMT

US Dollar Rose as Risk Aversion Left S&P 500 Bearish Price Signals

(MENAFN - DailyFX) Asia Pacific Market Open Talking Points USDgained on less-dovish Fed bets as Middle East tensions soured marketsS & P 500showing multiple technical bearish reversal warning price signalsAustralian Dollarmay fall as Asia Pacific markets begin week in sour mood

Not sure where theUS Dollaris heading next? We recently released thethird quarter US Dollar fundamental and technical forecast !

Fed Rate Cut Bets Cooling, Middle East Tensions Rising Fueled Risk Aversion

Financial markets were rocked during the final moments of last week as a combination of monetary policy themes and Middle East tensions resulted in the worst 5 days for the S & P 500 since late May. For starters, US front-end government bond yields rallied on Friday as markets unwound aggressive Federal Reserve July rate cut expectations as John Williams clarified previouslyincorrectly-interpreted dovish comments .

Then, heading into the final hours of the week, Iran's Revolutionary Guard reportedly seizedtwo oil tankers in the Strait of Hormuz . US-Iran political tensions have been increasing since the former nation withdrew from the Joint Comprehensive Plan of Action. Sentiment-linkedcrude oilprices rallied on supply disruption concerns, diverging from declines in the S & P 500 on rising worries over a conflict.

Unsurprisingly, both of these developments proved to be supportive for the world's most liquid currency, the US Dollar. Though it pared some of its gains towards the end of the session. On the flip side of the spectrum, we saw the pro-risk Australian Dollar underperform. In fact, technically AUD/USD's upside push this past week was tamed by afalling trend line from 2018 which kept the downtrend intact .

Monday's Asia Pacific Trading Session

Given this news, Asia Pacific markets may begin the week in a sour mood which would compound Aussie selling pressure. A quiet economic docket at the beginning of the new week works to place the focus for foreign exchange markets on risk trends. This may work to benefit the anti-riskJapanese Yenin the event of carry trade unwind.

S & P 500 Technical Analysis

The S & P 500, from a technical standpoint, is showing numerous bearish reversal warning signs. The most prominent is what appears to be a Head and Shoulders pattern in the making, with an Evening Star composing the head of the candlestick formation. This followed the presence of negative RSI divergence, which indicated fading momentum to the upside. A break under 2971 exposes 2947, former 2018 resistance.

S & P 500 Daily ChartUS Dollar Rose as Risk Aversion Left S & amp;P 500 Bearish Price Signals

Charts Created in TradingView

FX Trading ResourcesSee how the S & P 500 is viewed by the trading community at theDailyFX Sentiment Page See our free guide to learn what are thelong-term forces driving Crude Oil prices See ourstudy on the history of trade warsto learn how it might influence financial markets!

--- Written by Daniel Dubrovsky, Currency Analyst for

To contact Daniel, use the comments section below or@ddubrovskyFXon Twitter



US Dollar Rose as Risk Aversion Left S&P 500 Bearish Price Signals


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