Good morning Traders!
Wow, what a couple of days can do! On Friday Silicon Valley Bank went into receivership, and by Monday, we already got news that the unsecured deposits are going to also be guaranteed, and that is about 92%(!) of SVB’s deposits.
And as many have feared, the failure didn’t stop there, another bank, New York’s Signature Bank, which also held a large portion of the deposits unsecured, has also shut down, prompting a frantic reaction from the Federal government and the regulators.
On Monday, President Joe Biden was looking to calm the spirits, promising to hold responsible the people behind the collapse and stating that no tax payer’s money will be used for the bailout. (Though the president and other officials avoided this particular word, it does seem to fit here rather too well).
The collapse of SVB has caused many traders and investors, to reverse their stand that the FED might hike rates at more than 0.25%, some are even calling for no rate change at all, that saw the US dollar pulling back against many of its trading partners.
US Dollar Index (DX)
While the pullback on the Daily broke the uptrend this timeframe was in, on the Weekly chart this can be seen as a reaction to the very strong resistance level at around the 105.5
The Monthly chart is still in an uptrend, and after printing a bullish candle for the previous month, a break above this candle, which is also the 105.5 area, could signal the end of the pullback and a continuation of the longer term uptrend.
I’ll be looking for another touch at the 105.5 area and a further compression of price against this level, making Equal Highs and Higher Lows before a potential break of this level, or a strong decisive break and a close above the level, followed by a pullback to test this level from above.