Intraday Market Thoughts

Four Reasons USD is Slipping

Sep 21, 2018 12:51 | by Adam Button

The US dollar has suddenly turned in a move that's left some market watchers scratching their heads, while others vindicated. Earlier this week, Ashraf' issued a special video for Premium subscribers titled "Invalid Thesis" related to the US dollar. The DOW and DAX trades were  stopped out while the EURUSD and USDCAD were closed at a profit. Canadian CPI and retail sales are due next. Meanwhile, the pound is falling across the board on a BBC announcement that PM May will make a statement at 15:45 London time indicating she will not be changing her position on Brexit (TRNSLTN: sticking with her Checkers Speech and augmenting odds of a no-deal Brexit).

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Four Reasons USD is Slipping - Usdx Daily Sep 18 2018 (Chart 1)

The US dollar has quickly fallen to multi-month lows on a variety of fronts even as Treasury yields rise to multi-month highs and economic optimism rises. It's a change in correlation that's caught many off guard. Here are some of the reasons for the shift:

1) Global growth Trade wars are a looming risk but so far the hype hasn't matched the reality. Companies may be able to better-withstand the pain than believed

2) Midterms Pollsters are saying there is a 75% likelihood Democrats will take the House. That will cripple any chance of further US tax cuts but, more importantly, it will curb Trump's ambitions on trade and leave the US deadlocked once again.

3) Positioning This has been a looming risk on almost every front. CFTC positioning shows the market unequivocally long US dollars and better economic data in the UK and elsewhere has inspired short covering.

4) Twin deficits Rising yields are at least partly due to US trade and current account deficits expanding and the potential costs of financing external debts at a time when opportunities are beginning to present themselves elsewhere.

What's next? Stephen Jen pioneered the idea of the 'dollar smile'. It's a chart illustration of how the US dollar strengthens as growth is either 1.5% stronger or 1.5% weaker than G7 peers. The latest signal from the market may be that growth elsewhere will catch up to the US in the year ahead as the effects of the tax cut fade and other economies pick up. It's early days still, but this is a long-term trend to watch.

Act Exp Prev GMT
CPI (m/m)
-0.1% 0.5% Sep 21 12:30
Prime Minister May Speaks
Sep 21 12:45

بين حاجز الداو و الدولار

Sep 21, 2018 9:52 | by Ashraf Laidi

ما هي الخطوات القادمة بعد ما كسر الدولار دعمه و وصل الداو جونز الى قمة جديدة؟ الفيديو الكامل

بين حاجز الداو و الدولار - Orbex Video Snapshot Sep 21 2018 (Chart 1)

USD Breaks Support

Sep 20, 2018 11:39 | by Adam Button

2 days after Ashraf posted an-all clear video on the US dollar to subscribers, a broadening sell-off in the US dollar is underway after heightened divergences on Wednesday, but a trend of outperformance in commodity FX emerged on a combination of trade and global growth optimism. USDX breaks to 4-week lows below the 100-DMA for the 1st time since April. CAD drags USD below 1.29 and the Premium short in USDCAD has been closed with 140-pip gain. A detailed note has been sent to subscribers regarding what's ahead for USDCAD. GBP is the biggest outperformer on higher than expected retail sales, while the NZD is the 2nd highest performer of the day after a GDP beat. US jobless claims and existing home sales are next.

و أخيرا تم حل مسألة الدولار (فيديو للمشتركين)

US economic data included a nearly 10% rebound in US housing starts after two months of weakness. They were at a 1282K pace compared to 1238K expected. In the bigger picture, the market is signaling better global growth; or at least the ability to weather the latest flare-up in the China-US trade war. The optimistic signals have been undeniable despite worrisome US and China moves and ultimately, there's no arguing with the market, at least in the short term.

Could the broad USD decline be a usual reflection of the broad pick-up in global growth dynamics, which argues for more upside in non-Fed tightening in the course ahead? Yes, the Fed is expected to raise at least 4 more times (including 2 this year)...but let's revisit this assessment in we near the December meeting.

NAFTA negotiators didn't make any kind of breakthough and headlines about no deal this week briefly hurt the loonie but USD/CAD finished on the lows in part because of report the US was ready to bend on Buy America provisions.

The Australian and New Zealand dollars are also making solid gains. To underscore the better sentiment on growth, Japan's Nikkei 225 has risen more than 1% for four straight sessions.

Act Exp Prev GMT
GDP (q/q)
1.0% 0.8% 0.5% Sep 19 22:45

Rendez-vous Trading à Paris

Sep 19, 2018 17:31 | by Ashraf Laidi

XTB-France avec la participation d'experts des marchés financiers et professionnels de la bourse, vous invite à l'événement de l'année 2018 au sein des Salons Hoche à Paris Jeudi le 11 octobre à partir de 18h30.  Alexandre Leclair, Karen Peloille, Ashraf Laidi, Luc Vaudan & Jean-Louis Cussac. Inscrivez-vous maintenant.

Rendez-vous Trading à Paris - Xtb Paris Soiree Banner (Chart 1)

Growth Trumps Trade

Sep 19, 2018 14:57 | by Adam Button

The market's reaction to US tariffs and China's retaliation on Tuesday was remarkably positive as risk trades pushed higher at the expense of the Japanese yen and the Swiss franc. The Australian dollar was (and remains today) the top performer while JPY and CHF lag. The market reaction is a combination of eleveated traders' expectations explained here and the resilience of the global economy is. The macro data of the day is the upside surprise in UK inflation, particularly the core CPI breaking the BoE's target to hit 2.1%.

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Growth Trumps Trade - Spx Usdchf Usdcad Weekly Sep 19 2018 (Chart 1)

Global equity markets are again rallying in concert. A positive reaction to tariffs and a trade war between the two largest economies would have been unthinkable a few years ago but it emphasizes how solid global markets are.

We often talk about news being the best measure of a market and if markets can't be damaged by a trade war, then what can damage them. The nature of all news is that it's worrisome. If you own a stock, a bond or a currency you have to be on guard against the risks. What we don't talk about enough is that things are getting better.

Even recent comments from ECB and BOE were upbeat despite looming problems to both regions. The yield curve is worrisome but it hasn't inverted yet and even if it does, you can't bet on that alone.  Economic data in most of the world is solid with FX traders focusing on relative strength. This may be another explanation to the USD's retreat.

Another sign is the relentless march of money into new ideas. Last year it was cryptocurrencies and at the moment it's marijuana stocks. The animal spirits are alive and it will eventually end in pain but in the words of Chuck Prince, “As long as the music is playing, you've got to get up and dance.”

Act Exp Prev GMT
CPI (y/y)
2.7% 2.4% 2.5% Sep 19 8:30