Why the US Dollar Sold Off

HERE IT IS - Wednesday was a wild day! The big event of the day was the Trump press conference and this was where all the focus was. Lack of any meaningful economic data releases in North America made the political event even more intense. In the end, a massive pre-press conference push in favor of the US Dollar, before the Buck got absolutely smacked in the aftermath. So what happened? Well, here it is in short. US Dollar bulls were expecting Trump to talk taxes, deregulation and fiscal stimulus. Trump delivered on none of these fronts and all of this Dollar bullishness on expectation for Dollar bullish Trump policies was ultimately compromised, or at least came into some question after the President Elect failed to get into these topics. 

HANGING ON - But it's important to point out that even with this latest round of US Dollar weakness, the Dollar remains in the driver's seat. Technically, we would need to see a EURUSD break back above 1.0875 to take the immediate pressure off the downside and possibly suggest a more legitimate structural shift out of the US Dollar's favor (which could happen). So while Wednesday was a disappointment for Dollar bulls, there's no reason for Dollar bulls to throw in the towel just yet. But it is worth noting the compelling argument to be made for a weaker Dollar at this stage, with many pointing out that a USD that is too strong could end up hurting the US economy, especially if Trump is going to be looking to beef up manufacturing on the domestic front. 

ANALOG - I have no strong opinion at current levels and can really see it going either way right now. For me, I would be leaning more to the USD bearish side on a longer-term basis and I'm only wondering whether or not we see one more big push in the Buck's favor before the longer-term trend shift plays out. As far as my FX exposure goes right now, I am actually short the US Dollar against the Turkish Lira, looking for this market to reverse course after racing to record highs, going parabolic and tracking in violently overbought territory across the daily, weekly and monthly timeframes. I can remember in January 2015 when USDRUB made a similar move before pulling back, and I can remember in January 2016 when USDZAR and USDCAD did the same. My hope is that this pattern plays out yet again with USDTRY in January 2017.