Fed chair Janet Yellen will deliver her semi-annual congressional testimony before the Senate Banking Panel today. I expect nothing new from her today. It's too soon since the latest Fed meeting on 1 February to change course, and the dollar is too strong to hint at a March rate hike, in my opinion. I maintain my EURUSD short position. By the way, US National Security Adviser Michael Flynn's resignation is a non-event for FX, ignore it.
Open positions as of 14/02/2017 08:45am CET:
EURUSD short from 1.0795, unrealized return: +1.77%
Realized YTD return: +4.34% from 3 trades
Total YTD return: +6.11% from 4 trades
The US dollar index is struggling not to fall considerably below the 100 handle. It's currently testing its support at 99.43. Looks heavy short-term, but I stand by my USD long call m/t. Verbal interventions from politicians only have short life spans, causing plenty of interim volatility without leading to any permanent changes in market positioning. All things considered, Trump's promised stimulus package is USD positive, thus challenging the president's conviction that the dollar is too strong relative to the currencies of America's trading partners. The only serious challenge for USD longs would be 1) an undermining of the Fed's independence, or 2) a possible G20 accord to weaken the US dollar (G20 meeting in Hamburg in July), but either scenario is unlikely.
Different battleground: I'm still confident in my EURTRY short position. As the Turkish lira is finally gaining a bit of momentum I'm looking for a test of 4.0. Merkel meeting Erdogan today. Nothing market-moving will come out of that meeting, but the outcome will be interesting nonetheless.
Open positions as of 02/02/2017 9:42am CET:
EURTRY short from 4.0524, unrealized return: +0.83%
EURUSD short from 1.0795, unrealized return: -0.06%
Realized YTD return: +0.7% from 2 trades
Total YTD return: +1.47% from 4 trades
I've got no new trade idea today, so I'm posting this quarterly chart of the DXY going all the way back to 1964. Although I'm currently short USD vs EUR following the ridiculous Trump presser, I still expect a stronger USD in the medium to long term.
Whether the DXY will test its support at 100 first or turn around and go straight for the 105 handle depends strongly on what Donald Trump and his cabinet will be doing after 20 January and how quickly they will go about it. We already know they're set on repealing Obamacare as soon as possible, but market participants are still waiting for details on Trump's promised economic stimulus package. Needless to say, pressuring American companies into adding more jobs in the U.S. is one thing, delivering real change across the board will be far more challenging.
I'm not expecting any big moves in the USD before the inauguration and hence my short-term target in EURUSD remains 1.0700-20.
Open positions as of 13/01/2017 1:04pm CET:
EURUSD long from 1.0646, unrealized return: flat
Realized YTD return: +1.06% from 1 trade
Total YTD return: +1.06% from 2 trades