The dollar might be in a ‘breakout’ and if it is, that could be bad news for stocks

To stop the dollar’s rise against the euro, Chandler said there would need to be real signs that Germany is past the worst and its manufacturing sector is picking back up.

For now, he does not see the dollar making a big gain now, but eventually the dollar index could rise above 100.

“Europe’s the real risk right now. They’re the laggards here, and I’d worry about the dollar break out more, if we saw Europe continue to struggle,” said Paul Christopher, Wells Fargo Investment Institute chief international investment strategist. “It’s still not part of our forecast.”

Christopher said if the dollar did continue to gain, it would bite into profits and hit stock prices. However, he expects the greenback will ultimately be lower this year against both the euro and yen though it could see strength in the next couple months.

Christopher said a positive outcome would be if China’s economy stabilized, helping the U.S. and then Europe

He is concerned, however, that volatility could pick up, and that there are some risks to the market, including the so far unresolved trade negotiations between the U.S. and China.

Bespoke, in a note, said typically when the dollar strengthens stocks with high international sales tend to fall. “That hasn’t been the case recently, though, as the ‘internationals’ have been outperforming even as the dollar has been rallying…We would expect the “domestics” to start outperforming “internationals” in the near term as long as the dollar doesn’t take a big hit. If the dollar keeps rallying, you’re almost certain to hear about its negative impact from the “internationals” that derive so much of their revenues outside of the US,” Bespoke wrote.

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