USD Developed A Key Reversal Formation: How To Play It?

USD has developed a key reversal formation, a technical signal suggesting a near-term trend change and USD strength for now. Yesterday morning we warned that the USD decline had entered an unsustainable period by concentrating on low-yielding currencies such as JPY,EUR and CHF pushing global risk appetite lower. Markets started to raise the question concerning the cost of USD weakness carried by currency areas where policy tools to weaken local currencies looked exhausted.

Here, Japan is the most exposed with its deposit-funded banking sector reversing the impact of negative interest rates, turning them into a destructive tool. Switzerland has seen a sharp decline in its money supply expansion and a rise of mortgage rates since the introduction of negative rates.Similar effects have started to emerge in Germany, where bank liabilities are deposit-focused too, thus reducing the cost elasticity of bank balance sheets. Interestingly the EU Commission has revised its inflation forecasts drastically lower

...We suggest being long USD against commodity and EM currencies and will look to close any of our long risk positions in our portfolio.

This content has been provided under specific arrangement with eFXnews.

Advertisement
For a live simulators for bank trade positions and forecasts, sign-up to eFXplus

Share: Analysis feed

eFXnews is a financial news and information service. Articles and other information distributed in this service and published on this site are provided in general terms and do not take account of or address any individual user's position. To the extent that some of these articles include suggestions as to various possible investment strategies which users might consider, they do so in only general terms without reference to the personal factors which should determine any user's investment decisions to buy or sell a specific security or currency.

The service and the content of this site are provided and distributed on the basis of “AS IS” without warranties of any kind either, express or implied, including without limitations, warranties of title or implied warranties of merchantability or fitness for a particular purpose. eFXnews and its employees, officers, directors, agents, and licensors do not also warrant the accuracy, completeness or timeliness of the information in any of the articles and other information distributed in this service and included on this site, and eFXnews hereby disclaims any such express or implied warranties; and, you hereby acknowledge that use of the service and the content of this site is at you sole risk.

In no event shall eFXnews and its employees, officers, directors, agents, and licensors will be liable to you or any third party or anyone else for any decision made or action taken by you in your reliance on any strategy and/or advice included in any article and other information distributed in this service and published in this site.