Expect nothing new from Yellen today

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.

DXY Index 14/02/2017Open 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

Noise isn't news

While my open positions are going well, I have no ideas for any further trades. As usual, lots of noise coming from Trump, but nothing substantial and hence nothing tradable, in my opinion. Don't trade hot air, i.e. ignore what Trump is saying, focus on what his administration is actually implementing.

I'm looking for EURUSD to hit 1.06 today. Ideally, we'll see a re-test of 1.0524 soon.

EURUSD Daily 10/20/2017Open positions as of 10/02/2017 08:54am CET:
EURTRY short from 4.0524, unrealized return: +3.83%
EURUSD short from 1.0795, unrealized return: +1.39%

Realized YTD return: +0.7% from 2 trades
Total YTD return: +5.92% from 4 trades

European elections: Anxiety now!

Only a few days ago nobody was looking at Europe, despite the many challenges faced by the euro area this year. All eyes were on Trump, the US dollar fell after negligible comments made by the president and his staff of economic advisers. What a difference a weekend makes! It's Tuesday, the EUR is weakening for a second day in a row and miraculously the whole narrative by market watchers has changed. Analysts are highlighting the risk from European election outcomes that might endanger the euro zone, possibly even the European Union. It is as if market commentators woke up and, in unison, had the same thought: Anxiety now! The switch has been flicked, USD risk-off has been turned into EUR risk-off. It's a new week, so let's have a new story to tell. To be frank, I'm fed up with researchers and self-proclaimed journalists (who are doing a lot of things these days, but definitely not serious journalism) wanting to explain to me why an asset has moved in a certain direction after the fact. Instead, they should be separating the important news from all the noise (mostly coming from Trump these days), study the evidence revealed by their research and then make appropriate deductions about the state of the market as well as implications this might have for the future. Too often analysts change their opinion even after minuscule changes in asset prices, instead of showing any sign of confidence in their own research. How can this type of market analysis be taken seriously? Don't even get me started on journalism... The Economist aside, there's little I can read nowadays without having a total freak-out. Anyway, let's not digress: I'm standing firmly by my EUR short / USD long call.

EURUSD Daily 07/02/2017Open positions as of 07/02/2017 08:56am CET:
EURTRY short from 4.0524, unrealized return: +2.75%
EURUSD short from 1.0795, unrealized return: +1.05%

Realized YTD return: +0.7% from 2 trades
Total YTD return: +4.5% from 4 trades

USD struggling s/t albeit positive jobs data

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.

Dollar Index DXY 02/02/2017 EURUSD 02/02/2017 DailyDifferent 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.

EURTRY 02/02/2017 DailyOpen 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

Selling EURUSD at 1.0795

I have nothing new to add to my commentary on Navarro and the US dollar's strength from yesterday evening, but I'm putting my money where my mouth is: Sold EURUSD at 1.0795. This is not a near-term trade as I can see the pair going up to 1.0875 or even higher during the next couple of sessions (depending on Fed today & any Trump comments we might get), but in the medium- to long-term I believe the EUR short story will play out well. Read yesterday's post for details.

EURUSD short 01/02/2017Open positions as of 01/02/2017 9:38am CET:
EURTRY short from 4.0524, unrealized return: -0.56%
EURUSD short from 1.0795, unrealized return: flat

Realized YTD return: +0.7% from 2 trades
Total YTD return: +0.14% from 4 trades