09-01-2017 10:58 AM
With not much on the US or Euro docket until Friday we may see DX continue to drift up to test the top so keep an eye on the main USD pairs. Trump tweets add a new dimension with no time frame or content clues, interesting times.
11-01-2017 08:53 AM
Trump to give presser at 4pm today, may provide a jolt to the dollar in either direction. Trump is expected to add some detail to economic outlines given in election campaign. Retail sales figures out on Friday.
20-01-2017 09:57 AM
A day for watching and reacting rather than trying to make predictions as Trump due to make a number of speeches (no reliable timetable). Watchers will be listening for hints on possible future changes to trade agreements, tax changes (personal and corporate) and relations with China and Russia. Uncertainty likely to continue next week and into FOMC mtg Feb 1st.
DXY again eyeing the long term support/resistance level 10050 (from the monthly chart since early 2015).
22-01-2017 09:59 PM
EUR USD is playing an interesting pattern. It is unlikely that this trend has changed from its bearish trajectory, but does look as if their is some more juice left in this bullish trade. Because Trump could announce a series of measures they could act as a catylist for either direction, but most likely this will be dollar bullish, which therefore would send dollar crosses including gold and treasuries lower.
23-01-2017 09:00 AM
I see Goldman Sachs are calling a EURUSD end of year target of 1.00 while USB say 1.20. But the dollar, as you say @donaldprice, is going to be at the mercy of the Trump effect, especially during the first hundred days.
23-01-2017 09:19 AM
When you hear everyone calling parity that is exactly when you need to seriously question the positioning of the market. As you could see with cable, such heavy short positioning ended up in a squeeze. Trump knows all to well that a strong dollar is bad for exports and even though he may fail to stall the dollars bullish trajectory, he will without doubt do his best. Hence why we will struggle getting down to parity anytime soon.
23-01-2017 12:18 PM
Very good blog today by Brett Steenbarger on 3 ways to fail.
Also see the article linked within on politics and investing by Barry Ritholtz.
23-01-2017 12:52 PM - edited 23-01-2017 01:28 PM
Sustained strength of US currency may provide an obstacle to president’s plans
Richard Nixon’s Treasury Secretary John Connally once told foreign counterparts that the US dollar is “our currency, but your problem” — a blunt observation that has often rung true. Under President Donald Trump it may no longer be so simple. The new US president inherits a subdued but long economic expansion, low but accelerating inflation and a robust jobs market, which will probably force more interest rate increases in the coming years. But the dollar may well prove Mr Trump’s biggest economic challenge, and the vast $5tn-a-day currency market will be harder to browbeat into submission via Twitter outbursts than corporate chieftains and political opponents. “Of all the things that drive a currency, a policymaker’s opinions is not in the top 10,” says Marc Chandler, head of currency strategy at Brown Brothers Harriman. There are plenty of analysts who believe the US economy is relatively impervious to higher interest rates and bond yields, partly because of the prevalence of fixed-rate borrowing. But faster growth and rising rates are likely to suck in foreign capital and lift the dollar. This could prove a far bigger potential headwind.
A 2015 study by the New York Federal Reserve calculated that a 10 per cent dollar appreciation over three months knocks roughly 0.5 percentage points off the growth rate over one year, and another 0.2 percentage points the subsequent year if the currency strength persists. Moreover, the, New York Fed’s researchers stressed that even this estimate does not include the impact on domestic investments by US companies hurt by a stronger dollar. “Most US borrowers aren’t that sensitive to interest rates, with many locking in low rates already. The biggest impact will be via the dollar, which hits manufacturing,” warns Joachim Fels, Pimco’s global economic adviser. Restoring US manufacturing and improving the trade balance are central to Mr Trump’s plans, and it is clear the administration is concerned over damage a stronger greenback can wreak. The president had already questioned the US government’s longstanding policy to at least voice support for a “strong” dollar, but this week he went further. On Monday he declared that the currency was too high, preventing US companies from competing with Chinese rivals. “It’s killing us,” he said in an interview with the Wall Street Journal. But underscoring just how tricky the administration’s policies and messages will be to parse for markets, Steven Mnuchin, Mr Trump’s nominee for Treasury Secretary, then reiterated the more traditional “strong dollar” position at his Senate confirmation hearing.
Verbal jawboning is likely to get more aggressive and frequent if the dollar continues to climb, but absent co-ordinated intervention among the biggest countries in the world — not unprecedented but improbable given the new administration’s rhetoric and other countries’ desire for weaker currencies — is unlikely to have a lasting impact, analysts say. “Mr Trump, as far as anyone can tell, would quite like a weaker dollar and higher rates. But it’s the policy choices he makes rather than his personal preferences that will determine what actually happens,” notes Kit Juckes, a strategist at Société Générale.
Of course, not everyone is convinced that the dollar’s run will go much further anyway. The DXY dollar index has already climbed 26 per cent since mid-2014, thanks to the country’s economic and interest rate divergence from its major counterparts. The dollar index is now about 3 per cent above its five-decade average, and a net 22 per cent of investors polled by Bank of America think the dollar is already overvalued, the highest since 2006. Indeed, betting on the US currency was also voted as the most crowded trade at the moment. Nonetheless, while analysts are uncertain of just how much of the new president’s touted economic policies will actually be implemented, most agree that the dollar is likely to strengthen as a result.
Deutsche Bank’s Alan Ruskin points out that the greenback has now entered the ranks of the top three G10 high-yielding currencies — typically an omen of further strength. As a result, he predicts that it will be a “King Kong” in FX markets this year, swatting most of its counterparts aside, breaking parity to the euro and approaching new all-time highs versus the Japanese yen. Even strategists that are more sceptical of the “Trump trade” of betting on faster growth, quicker inflation and interest rate increases are wary of standing in front of the dollar steamroller — at least for now. “We saw with the Japanese yen in 2012 and 2013 that the market’s belief can remain unfaltering even when results are mixed. Hence, we would not stand in the way of the dollar rally, even if we are ultimately not that convinced by the reflation story,” according to David Bloom, HSBC’s chief currency strategist. But Mr Bloom believes that most of the greenback’s gains will come in the first half of the year, as the cold, hard reality of US governance begins to undermine investor confidence. “The first half will be full of euphoria, optimism and hope. The second half should see the dollar give back some of its gains as the bureaucracy of office and economic reality kicks in,” he predicts.
31-01-2017 09:50 AM
FOMC tomorrow, DXY holding on to 10,000 for now. Rates expected to remain unchanged but price will respond to any clues as to the number of possible rate rises this year. Hawkish (more) could see a breakout of the descending trendline, dovish (less) could see a big move down to the counter trendline.
01-02-2017 11:28 AM
I do think their is a possibility of a test to the 9900 level on DXY of which if it holds then we could see a resumption of the dollar rally. Tonight is crucial to know what the FED is looking for and what data to watch.