In a less than two hours, Donald Trump will deliver a historic speech: the inaugural speech. The uncertainty surrounding Trump’s behavior and its policies, create an environment were his first words as President could impact financial markets. So far, Trump’s name is being associated with uncertainty.
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The US dollar accelerated the move to the upside since Trump’s election. Would it continue to rise during and after his inauguration? Much could depend on what he says and also in “how” he says it. After today, investors will have the opportunity to finally see what Trump actually does.
Taking into account that greenback has been rising since the elections, supported by the potential fiscal policies from Trump, a reaffirmation of those policies could give support to the rally. But, a scenario of “buy the news, sell the rumor” should not be discharged. It is an unpredictable speech, with unpredictable consequences.
Analysts at ANZ noted that the inaugural speech is to be written by Stephen Miller who wrote many speeches for Trump’s Presidential campaign. “The speech is expected to focus on structural problems within the US economy and outline an agenda for Trump’s first 100 days and beyond. Trump outlined his plans for his first 100 days at his 22 October Gettysburg address. The most contentious of which are his plans on trade, including withdrawing the US from TPP and labelling China a currency manipulator.”
Kit Juckes, Research Analyst at Societe Generale, notes that the first hundred days of the Trump Presidency are about to start and he is likely to adopt pro-growth and dollar-supportive policies, while he may repeat his resistance to a strong currency.
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What could the US dollar do?
The US dollar index has been rising constantly since September and peaked in December around 103.00 (14-year high). So far in January, it has been making a correction. Currently, that correction has lost strength. Today’s speech could reinforce the current tone or could give the first push, toward a resumption of the bullish trend.
Before the speech, the DXY was hovering around 101.00. From a technical perspective a decline under 100.60, would expose 100.00 and below here the next strong support could be seen around 99.00/10. To the upside, the index could gain bullish momentum above 101.80, but a clear break on top of 102.00 would be a signal of a potential rise toward 103.00.
If the speech has a moderate impact, the US dollar could continue its correction tone across the board, with the DXY remaining within a bearish short-term channel.
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