The big news today will be both Fed chief Warsh

Euro

We got a higher high and higher close yesterday, and both above the 10-day MA (just). The low did not break hand-drawn support at 1.1366, making it only to 1.1382. 

But the candlestick is very nearly a hanging man, which would be consistent with the upmove ending. It could just be the usual turnaround Tuesday or it could be a warning that traders will be paring ahead of the big weekend in the US.

Outlook

The big news today will be both Fed chief Warsh and ECB chief Lagarde speaking at the Sintra conference. Warsh dislikes forward guidance so what will he talk about? We all need to stop expecting clues and hints about future policy. Maybe something about what central banks should be doing other than setting rates, and what they should stop doing.

Then it’s on to ADP today, payrolls tomorrow, likely pretty good, and the Friday holiday.

The environment is weird. Yields jumped back up yesterday for no particular reason anyone can find. Analysts scratch around in Fed funds futures forecasts but the changes are too small to count on.

Oil prices are low and not responding to the idea the Iran war/Strait problem will go on, and on, likely delivering another closure and thus a price boost. The US stock market may be willing to buy the dip and the Nasdaq delivered that best-ever half-year, but the bubble idea is now firmly planted in everyone’s mind, and nerves are getting frayed.

Finally, the dollar. Reuters reports its survey shows a majority of FX strategists foresee a fading of the dollar’s latest bounce. This will be due to cooling oil prices cutting into inflation and rate hike expectations. Then “a sizable minority say the strength is here to ​stay.” Can they have it both ways?

“Poll medians showed the euro rising 2% to $1.16 by end-September, $1.17 at year-end and $1.18 a year from now…. A strong 71% majority, 29 of 41 respondents - who have broadly called it right in surveys conducted this year - said current net-longs would hold or increase by the end of July. The rest predicted a​decline. No one expected a reversal to net-short positioning.

“About one-third of strategists in the survey, 23 of 70, also forecast euro-dollar to remain flat or​even edge down in three months. That is more than around 20% in June's survey.”

See the euro chart and at the end, the forecasts for the rest of the currencies. Dig that crazy Turkish lira entry.

Forecast

FX strategists are not traders. They may know the economics and other fundamentals, especially the institutional stuff, plus cross-asset relationships. But do they have a feel for the market, aka sentiment? We smell a strong anti-dollar sentiment that is being overridden by some inconvenient facts, like robust and better growth, high and rising yields, and that loony stock market.

The strong anti-dollar sentiment arises from a number of sources, most of them named Trump. He is wrecking the global world order, as Canada’s Mr. Carney said. The new world order “should” deliver a far weaker dollar, but is not coming through, so far. We have no reason to suppose it will arrive next year, either. No wonder the strategists are divided into the two camps.

For the immediate future, by which we mean to next Wednesday, we expect the dollar to recover and the euro to test the last low at 1.1324 from June 24. Because of the holiday, we will chicken out by noon tomorrow.

Tidbit: The press is agog at the disclosure that Trump and family have managed to grift $2.2 billion since taking office. It’s unprecedented, it’s disgusting, and it’s illegal. It also shows the founders imagined graft but never imagined a guy as extreme as Trump and their guardrails were not nearly high enough. The folks in Congress today are a bunch of lily-livered cowards who should pay with their jobs for failure to act.

Food: Trump does not own America. His belief that he owns it is his delusion. It’s OUR country, not his.