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Apple worth $2 trillion & Fed shocker

Dollar index (DXY) – 4hr Candlesticks
Source: GKFX / MT4 (August 19, 2020)

The drop in the dollar index to new 2020 lows looks like a false breakdown below support at 92.5. The price has been unable to follow through to the downside so it has rallied back into the horizontal range. The implication would be a re-test of the range highs near 93.8/9.
 

TAKEAWAYS

•    Apple is the first US company to reach a $2 trillion valuation
•    Dollar rallies after Fed minutes spook markets with dire warning, no YCC
•    Gold & Major FX see big reversals
•    DAY AHEAD: ECB minutes, US jobless claims
 

MARKETS


The US dollar finally caught a break, backing up from 28-month lows following Federal Reserve minutes that spooked investors out of stocks and into the buck. DXY jumped 100 pips (see chart above) while USD/JPY popped above 106 and EUR/USD fell back below 1.19.

Gold was hardest hit from the rising dollar, falling over $70 per oz to a new 1-week low. The reaction in oil prices was more muted amid the OPEC+ and JMMC meeting of oil producers.

The S&P 500 reversed from record highs having come just short of breaching $3400 for the first time. European shares missed the reversal and are likely to have a difficult start on Thursday. Shares in China dropped with the Shenzhen component falling over 2%.
 

GURU WISDOM

“It’s difficult to make predictions, especially with regards to the future.” - Proverb
 

Apple 2 trillion


Shares of Apple made another new record on Wednesday, helping the company to a market capitalisation of over $2 trillion. The recent string of gains happened in the wake of the firm’s 5-1 stock split. More shares at a lower price do not affect the fundamentals of the company but it does make the company more affordable to invest in. The $2 trillion valuation is 2-years to the month since the company hit $1 trillion for the first time. After Apple struck $1 trillion there shares went from under $200 to $230 before slumping 25% to under $150.
 

Minutes Reaction


Two things seem to have sparked a move back into the US dollar and and out of riskier currencies and other risky assets. The first was the grimmer economic assement than anticiapted that created a risk-off tone in markets. The minutes warned the “ongoing public health crisis would weigh heavily on economic activity, employment and inflation.” The second was that officials seemed to back off from the policy tool of yield-curve control, where asset purchases are made to keep bond yields at a specific level. Keeping interest rates low is naturally associated with a weaker currency. The minutes said that “many participants judged that yield caps and targets were not warranted in the current environment”.
 

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