More Talking Down of the Buck

UNDER THE RADAR COMMENT - Monday's economic calendar was basically empty and this in conjunction with President Trump overseas, helped to calm things down, with the general tone quite mild. Still what little price action we did see was more of the same, with the US Dollar extending declines and the US equity market back on the bid. And although the Euro gains were quite mild, the single currency managed to push to a fresh 2017 high. Interestingly, while many attributed the Euro jump to comments from the German Chancellor that the Euro was too weak and it was up to the ECB to help change that, it may have also been bid on comments from President Trump,  while at a press conference in Israel with President Rivlin.

MORE PROTECTIONISM TALK - The comment really didn't get a lot of attention in financial press from what I saw and I think it was a miss on the media's part. The financial media probably wasn't expecting the President to talk the US deficit while in Israel, but that's exactly what he did in a kind of off the cuff, in passing remark towards the end of his address. Basically, President Trump turned to Rivlin and said he was going to try and get the deficit down and he hoped that it would be ok for a bit.  The reason why he said he hoped that it would be ok was because in order to do so, it would mean increasing manufacturing in the US and focusing more on US exports, which in turn would mean a softer US Dollar, something that could make exporter countries uncomfortable going forward.

SHORT-TERM USD LOSSES - And so, it's really hard to have a bullish US Dollar outlook when we keep seeing messages of protectionist policy. Of course, what makes it even more challenging right now is that US data has been mostly unimpressive of late and Fed odds have been pricing out what had been a near certain rate hike next month. This has opened another push in US equities, which ultimately can't be bothered by anything for more than a few minutes before pushing to new record heights. But this still doesn't change my outlook going forward. While I believe we could easily see this US Dollar selloff extend in the days ahead, I also believe the equity market will come off the rails and that alone will fuel an intense wave of US Dollar demand that will run over anything in it's path.

STRATEGY - We're not there yet, but just wait and see. US protectionist policy and scaled back Fed hike odds won't do a thing when the stock market is falling and the safety lure of the Buck is all that matters. As far as trading goes, I have my eye back on EURGBP and AUDNZD. With EURGBP I'm looking to fade this rally and with AUDNZD I'm looking to buy into this dip. Remember, the other week, we exited AUDNZD at cost and took a small loss on a EURGBP that wasn't working out. But now, both markets are at more attractive levels which makes things more exciting and we just have to wait and see if one of them or both of the sets up.