The new pressure on US stocks: the US dollar is strengthening!

According to data from sevensreport Research, the US dollar rose to a two-month high last Thursday, showing a bullish signal from a technical perspective, and may continue to trend upwards in the coming months.

Tom Essaye, founder of Sevens, pointed out that the strengthening of the US dollar since early June will put pressure on the stock market.

Dow Jones Market Data shows that the US dollar index has risen by about 1.3% in the past month and rose above 103 last Friday. Compared with the 53-week high set in September last year, the index has still fallen by nearly 10%.

Essaye pointed out that from a technical perspective, there are signs that the US dollar may have formed a bottom.

Essaye said that the US dollar index has been hovering above the key support level of 101. At the same time, the downward trend of the US dollar since October has not been sustained since last week.

"If the US dollar index is about to rise again, it is expected to become a new source of overall pressure on US stocks," Essaye wrote.

The strengthening of the US dollar is not good for US stocks, as it usually puts pressure on US companies' overseas sales. Essaye pointed out that about 40% of the revenue of S&P 500 index component companies comes from outside the United States.

The US dollar has risen in several bear markets in the past, including the bursting of the dot-com bubble in 2000, the financial crisis of 2007-2008, and the COVID-19 pandemic that began in 2020.

Last year, the US dollar appreciated while US stocks fell. The US dollar index peaked at the end of September, and two weeks later, US stocks fell to their lowest level of the year. According to Dow Jones Market Data, the S&P 500 index hit a cyclical low on October 12, 2022.

Sevens pointed out that if the US dollar and US stocks follow a similar pattern this year, US stocks may begin to feel the impact of the strengthening of the US dollar in early June.