Why the US Dollar Won on Monday


TRADE WRAP - We didn't see much going in the markets on Monday, but there was enough to take us out of that NZDUSD short at cost. I'm now hoping we get an opportunity to sell NZDUSD further up, or if not, maybe get another shot at buying the GBPNZD dip. I was looking for a much bigger drop in NZDUSD the other week and though we did get close to seeing that follow through, it never happened. So it's back to the sidelines there and we wait again. But if NZDUSD rolls over from here and GBPNZD pops up, we should still be ok, given the long AUDNZD exposure.

SUBTLE NUGGETS - But looking at Monday price action, there were some subtleties that I think were interesting and worth noting. On Monday, US data was soft again and initially, the market tried to sell the Buck. But these efforts were met with stiff resistance and the Dollar actually ended up on the day against the major currencies. This was even more telling if you consider the news of the deal between the UK PM and DUP and the record high German IFO reading, which should have both been very supportive of GBPUSD and EURUSD respectively. 

The fact that the US Dollar wasn't hit hard and was even up a bit, is telling us something. Via @joelkruger

POINT DOLLAR - And so, the key takeaway, even in a quiet day like Monday is that the market is taking the Fed more seriously now. While the market may not be ready to start buying US Dollars aggressively at this point,  holding to that prospect for another letdown on forward guidance,  it also isn't super excited about selling the Buck either right now. Clearly this shows the Fed's definitely getting a little more credit this time round. The Fed sent a message it wasn't going to be prioritizing data as much at this month's meeting, with the clear objective of keeping with policy normalization.  And so, even though it wasn't much, Monday was a victory for the US Dollar. 


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