Overbought Market Meets Rising US Dollar and Tightening LiquidityView all comments (0)0Stocks finished mostly lower, with the equal-weight Invesco S&P 500® Equal Weight ETF (NYSE:RSP) down about 60 bps, while the market-cap-weighted index closed flat. Today kicked off what should be an eventful week, but so far, there’s not much to talk about.The Treasury announced it plans to rebuild the TGA to $850 billion by the end of both September and December, signaling that Bessent & Co. isn’t looking to shake things up—for now.The Treasury also expects to borrow just over $1 trillion this quarter—$453 billion more than projected in April. Next quarter, it plans to borrow an additional $590 billion, still targeting a TGA balance of $850 billion. On Wednesday morning, we’ll learn how they intend to finance all this borrowing, with most expecting the bulk to come via T-Bill issuance.Rates were largely unmoved. Even the 30-year yield rose modestly, up 3.5 basis points to 4.96%.But more importantly, this will allow the TGA to be replenished, which should ultimately result in lower reserve balances held at the Fed and lower liquidity levels.The biggest move today came in FX, with the dollar strengthening—particularly against the euro—after the trade deal announcement, which appeared to heavily favor the U.S. Whether the EU chooses to accept the agreement is another matter, as it still requires approval by member states.EURUSD is teetering on the edge of a breakdown, sitting just above key support at 1.159. The uptrend has already failed, and momentum, as measured by the Relative Strength Index, has also rolled over. A break of support likely opens the door for a move lower, potentially down to 1.119.A stronger dollar will also work to reduce liquidity in the market, since most measures of “global liquidity” are just dollar proxies.In the meantime, stocks just churned with little real movement. The S&P 500 remains overbought, with an RSI above 70 and the index trading above its upper Bollinger Band. While it’s possible for the index to stay overbought for an extended period, several factors—such as low realized volatility, tightening liquidity conditions, and a stronger dollar—suggest these conditions may not persist much longer.Original PostOverbought Market Meets Rising US Dollar and Tightening LiquidityView all comments (0)0Latest commentsInstall Our AppScan QR code to install appRisk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.© 2007-2025 - Fusion Media Limited. All Rights Reserved.