All it took was one dovish comment from Jerome Powell on Friday at Jackson Hole for the USD to weaken. Curiously President Trump has recently been critical of the Federal Reserve for continuing to raise interest rates. With another rate increase pending with 90% certainty in September, followed by one more in December with 60% probability…where will the USD go from here? I will leave that for analysts and economists to muse.
Will President Trump be able to influence Jerome Powell and possibly Mario Draghi? The latter having already stated that interest rates would not go up in the E.U. before the end of next summer. If the president chooses to believe other countries have been manipulating their currencies to make them more competitive, what would happen if he tells Germany for example, that their economy is growing very nicely and it’s time to raise interest rates or risk substantial tariffs on German goods imported into the U.S.? A couple of tweets of this nature strikes me as plausible.
In mid June, Mario Draghi’s comments were able to knock the euro down from 1.1851 to 1.1563 in a day. It looks like this level could be retested if the USD continues to soften. It’s difficult to not make a case for a stronger USD but since Friday the market has been selling the USD and President Trump may be getting his way at the moment.
Despite a weaker USD today, in the U.S. session overlap the GBPUSD set up for a short trade. Risking 15 pips for a potential 79 pips to our daily target, we were able to capture a move downward before having to close the trade at the European close due to a scheduled appointment. A potential reversal candle at the close made for an easy decision to get out – having bounced upward from its low by 11 pips.
There is some U.S. economic releases scheduled for Wednesday to be aware of – as well as potential volatility for the USDCAD. Crude oil inventories and any headlines regarding the trade agreement between the two countries may cause the pair to be volatile.
Trade cautiously and don’t let your profits turn into losses.
Good luck with your trading!
