Staying USD long

Donald Trump's first address to Congress turned out to be uneventful. His "America first" motto shone through, but he managed not to say anything negative or too dopey. Everybody is still waiting for him to present details on how he is planning to implement the promised tax cuts or provide stimulus to the US economy. I stick with my credo that listening to Trump is a bad strategy; I prefer to watch out for actual implementations of what he promised. I've said this before: Ignore Trump noise. As such I also maintain my EURUSD short position as the overriding narrative of Fed rate hikes combined with economic stimulus and European election risk is still active. Support levels 1.0524, 1.0454 and 1.0341.

EURUSD Monthly 01/03/2017USDCAD looks constructive for a long trade targeting 1.3575. Technical analysis, continued USD strength & Canada NAFTA risk supportive. On my watch list.

USDCADOpen positions as of 01/03/2017 8:50am CET:
EURUSD short from 1.0795, unrealized return: +2.56%

Realized YTD return: +4.34% from 3 trades
Total YTD return: +6.9% from 4 trades

Fed on track to hike: USD long

Expectedly, Yellen didn't provide anything enlightening yesterday. The market realized the Fed is still on track to hike rates this year, with March being a "live" meeting (although the hike probability is not high by any means for that meeting). Perhaps traders are still remembering 2016 when the Fed didn't hike as often as had been expected. Traders should forget all about 2016! The Fed entered its rate hike cycle, and it will hike again. Traders should also pay less attention to Trump statements. Let's wait for actual implementations of his promises instead. Regarding his USD rhetoric, it's meaningless. If his administration will deliver on his stimulus promises, which I think it will, that will be inflationary and ultimately positive for the US economy, i.e. it will give Yellen & Co. even more reason to continue hiking rates. It will also be important for the Fed to prove it is an independent institution; the US president has no business pressuring his nation's central bank. Everything is playing into the USD long story at the moment. Don't let Trump noise fool you into thinking anything else.

EURUSD Short 15/02/2017

Quick look at NZDJPY: After I chickened out of putting on a NZDJPY long trade post-RBNZ, the pair is looking constructive again. Trendline support still valid. On hold but definitely interesting.

NZDJPY Daily 15/02/2017Open positions as of 15/02/2017 10:19am CET:
EURUSD short from 1.0795, unrealized return: +2.37%

Realized YTD return: +4.34% from 3 trades
Total YTD return: +6.71% from 4 trades

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

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