US Dollar Soars, Nasdaq 100 Sinks. Markets Face China Covid Lockdown Threats Again

US Dollar, Nasdaq 100, Fedspeak, China Lockdown Risk – Asia Pacific markets open

• The US dollar gained as the Nasdaq 100 edged lower amid hawkish Fedspeak
• The issue of China’s Covid lockdown has returned to Earth
• Asia-Pacific markets may be in for a pessimistic trading session

Asia-Pacific Market Summary – Nasdaq 100 Falls, Dow Jones Not Much

The haven-linked U.S. dollar outperformed its major counterpart on Monday, appreciating amid easing risks. At the close of the Wall Street trading session, the tech-heavy Nasdaq 100 fell about 1.1% as the blue-chip Dow Jones was little changed. The difference between the two in 24 hours still speaks to the Fed’s political concerns.

Fedspeak was in focus on Monday. San Francisco Fed President Mary Daly spoke and said that they should not ignore the end of the policy, “which could take several months”. However, he added that the central bank is still “very far” from its inflation target. He sees the growth rate between 4.75% – 5.25%. The point here is that meeting politics may be a long way off.

Treasury yields rose cautiously. Unsurprisingly, gold prices suffered against fiat as the yellow metal fell for the 4th consecutive trading session. It was the worst loss in more than a month. The three worst performing currencies against the US Dollar on Monday were the Japanese Yen, Australian Dollar and Euro. They decreased by 1.25%, 1.02% and 0.8%.

US Dollar Versus Nasdaq 100 on Monday

Charts created in TradingView

The Asia-Pacific trade meeting on Tuesday has no outstanding economic risks. This puts the trader’s focus on risk as a market mover. Wall Street’s performance on Monday opens the door to lower controls in regional markets, putting the Nikkei 225, ASX 200 and Hang Seng Index at risk. This may continue to benefit the US dollar.

There may be more concern from China, with fears of a stricter lockdown due to Covid. That’s because according to Bloomberg, the city of Shijiazhuang has suspended schools and asked residents to stay at home for 5 days. The city is a testing ground for China’s attempts to ease virus restrictions. Signs that it doesn’t work could mean further delays in reopening, potentially damaging economic growth. The US dollar is trading at its highest level against the Chinese Yuan since November 10.

US Dollar Technical Analysis

Technically, the DXY US Dollar Index closed at its highest since November 11. This followed the price could not hold close to the 78.6% Fibonacci retracement at 106.806. The 200-day Simple Moving Averages (SMA) continue to maintain an upward bias. The main resistance appears to be the 20-day SMA.

DXY daily chart

Charts created in TradingView

— Written by Daniel Dubrovsky, Senior Strategist for DailyFX.com

To connect with Daniel, follow him on Twitter:@ddubrovskyFX