Is the USD Really Turning Around or Was Yesterday Just A Dream?
Skerdian Meta • 2 min read
The US Dollar has been dumped for more than a year and nothing seems to stop it. Neither fundamental events, nor technical levels have been able to stop the fall, so if the USD is to reverse, the reverse is going to come from politics.
The problem is, the politics have been against the Buck during last year. Trump and his minions have been jawboning the USD while attacking other countries with surplus trade balance and cheap currencies according to him, such as Germany and China.
As a result, the US Dollar hasn’t been able to raise its head above water. But things might be changing. Yesterday, Donald Trump arrived in Davos and he shifted the rhetoric regarding the USD, from dovish to hawkish.
He said that Mnuchin’s comments the day before about a weak USD being good for the US economy were taken out of context. He said that a strong Dollar is good for the US. Those were some bold comments which reversed the markets immediately.
The Dollar immediately climbed around 150 pips, but this morning the Buck has given back almost all its gains.
So, is the USD reversing?
Maybe not immediately, but the signal yesterday was pretty strong. I think the market is taking Trump’s comments with a pinch of salt. Forex traders want to hear more such comments in order to be sure that Trump is not just messing around. We know he likes to talk and often he doesn’t support his words with actions.
So, the market is just testing him again today. If we get more similar comments, then the reverse will come. Traders want to be sure that Trump meant what he said, that a strong USD is good. All other major players in forex want the Buck up because their currencies have gained too much against the USD last year.
It’s just the White House that has been against the USD. So, if White House shifts to hawkish, the USD trend will shift to bullish, keep an eye on Davos for more comments from Trump and Mnuchin.