The Rodeo that is This Week


DIFFERENT KIND OF WEEK - On Monday I talked about wacky price action we could see this week on account of the July 4th holiday and that's exactly how it's all been feeling thus far. Monday's US Dollar push wasn't anything that could be accounted for as far as any Monday catalyst was concerned, with the move even more interesting when considering the fact that we had just come off a Friday that was warning of a possible top for the US Dollar. But the market was perhaps showing sensitivity to the holiday week trade, with Canada also out enjoying a long holiday of its own to celebrate Canada Day. Let's not forget the impact of World Cup as well. The price action may also have been coming from fresh orders to start the second half of the year, with those orders to buy Dollars on bets the US Dollar will continue to do what it has done from January through June. This is a bet that isn't without merit as highlighted in recent updates, with the Buck a currency now in position to benefit both as a positive carry and flight to safety. All of this Dollar strength hasn't been good for my positions, with GOLD suffering as well on the back of the flow, despite what should be a better bid GOLD market given the risk off sentiment in the market at the moment.

cartoon july 3

DOWN THE STRETCH - As far as the technicals and fundamentals go, the story is unchanged from my perspective and I am expecting renewed selling in the US Dollar, specifically against GOLD, the Pound and the other major currencies. I don't think we've gotten anywhere close to seeing what this US administration is going to do in order to influence its protectionist platform, which should weigh on the Dollar, even in the face of resistance abroad, and at the same time, while this is happening, I expect it will only fuel more risk off flow that the other major currencies will need to absorb on account of US policy. This will be what helps GOLD in a big way as well. Technically speaking, the US Dollar does still remain in the driver's seat on a short term basis as per the daily charts and this could end up resulting in my stop loss getting triggered on the long GBP exposure. But at the same time, there is another technical consideration that is worth noting into Tuesday that isn't as bearish GBPUSD (or EURUSD for that matter as well). At a closer glance, while both the Pound and Euro reversed on Monday and put in bearish performances, the price action in both major pairs was nothing more than 'inside day' price action, the type of price action that is less bearish and actually more neutral than anything else. So if these markets can now recover back above their Friday highs, it will actually be a much more bullish development than if they had simply extended Friday's gains without the Monday setback. It will get a lot more interesting and exciting if that happens.

The US Dollar is running strong but if $EURUSD and $GBPUSD break Friday's highs, will be very bearish USD.


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