Why I'm Looking to Buy the US Dollar
|STRONG OPINIONS - Everyone out there is trying to figure out what this new US administration will mean for the US Dollar. In the past, when this question has come up with other administrations, you usually get more of a consensus view. But this time, not only are we not getting a consensus view, we are hearing strong opinions on each side. Many out there believe the US Dollar will suffer quite a bit, while others believe the Dollar is going to be making another big run. From a political standpoint, this argument seems to come down to what these calls believe will be a priority to the Trump government. If Trump chooses to spend more time focusing on protectionism and trade wars, the outlook for the US Dollar does not look good. Arguably, a weaker Dollar would also be a positive for the Trump government if it wants to focus more on manufacturing in the US. On the other side, if the government focuses more on fiscal stimulus and tax cuts, this should open the door for a big upside push in the Buck.
BACK AND FORTH - And so, right now, the best thing to do is to sit back and wait. The good news is, this type of back and forth and strong conviction on both sides should invite plenty of volatility, which is all we can ask for as traders. Personally, while I don't have a strong enough opinion to be trading it, I would be surprised if the US Dollar is done. My view is that we should still see another USD run. With that said, and given this current USD slide, my strategy over the coming sessions will be to look to take advantage of the USD dip. I'm not sure which currency I'll be buying but more likely than not, it is going to be the currency that most extended on an intraday basis. Taking a position on extended intraday technicals is always a great way to get involved because even if you are wrong, you still have the shorter-term chart in your favor, in the sense that at a minimum, it should stall out before continuing in the direction of the trend. This leaves me with a great opportunity to get in at a comfortable point where I can see if the trade can get going.
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