Don't Be Fooled


JUST NOISE - We saw some renewed US Dollar selling on Monday and the price action was hardly reliable in my view. There weren't any clear catalysts for the move and it just seemed like more consolidation than anything else. There are some out there attributing US Dollar weakness to White House instability and geopolitical tension between the US and North Korea, but as much as these negative risks are US specific, that correlation between reduced risk appetite and a higher US Dollar is still very much alive and one that should not be easily dismissed. It has never really mattered if negative risk is happening in the US, especially when it comes to risk that will have an unwelcoming impact on the rest of the global economy. And so, if this risk really does intensify, I believe the Buck will actually rally. 

STRATEGY - The US economy is the most sophisticated economy in the world and the US Dollar remains that number one option when everything ain't looking great. With that said, I wouldn't be reading too much into the Monday price action. The Euro rallied back above 1.1800 and has many out there thinking new highs. But I still think with the way things are going, we could just as easily see another sharp reversal lower today, that sets up an accelerated decline in the Euro, while with maybe the exception of the Yen and Franc, the US Dollar is back to outperforming across the board. I'm not seeing any trade with EURUSD at the moment, though I would be looking to sell further up, and I also have my eyes on taking a short position in EURGBP. Let's see how it all plays out on Tuesday. 

$EURUSD rally very capable of stalling out for fresh multiday lows. Via @joelkruger



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