We`ve mentioned the DXY spot 200DMA and 100 on the daily before. It was either going to break above the 200 or hold below. We`re higher, but why and where might it end all this USD strength?
It has rallied well to 92.50 area with next resistance being the January high 92.64 with the Fed meeting minutes printing tonight.
Bond yields basically and in particular, yield differentials. Are we seeing a top in yields? The Donald`s tax reforms are another driver, even though they are a watered down version of his original plan. Was that the result of POTUS classic “ask for the max and settle for what I really want”? There is evidence that repatriations of vast holdings in Treasuries held abroad are being shipped home by multi-nationals buying into the tax reforms. That`s bullish USD. Fed interest rate expectations it can be argued, are the overall driver.
Progress on North Korea. Stronger than expected growth for the US, albeit still at historical lower growth ranges in a fragile global economy. Investors overall faith that deals will get done on the so-called trade-wars. These are the fundamental drivers that I can hold onto.
Anymore I might have missed folks?
Then we have to view the competition. The market is still long the Euro. It can be argued it is still long the GBP. Just 2 of the major DXY constituents. Long the Yen? K-man has the handle on that one but what say you all?
The more I look around, the more unwinding I can see of these long markets. So why stand in front of the Dollar train? It is just as likely that some of these long markets might unwind more, sending the Euro and GBP generally lower.
A combination of US economy strength, Fed hike expectations and unwinding of currencies long the market. currencies such as the Euro amidst Europe`s problems getting growth and falling back yet again. GBP and the UK`s inherent headwinds surrounding lack of growth and Brexit. Japan is picking up? Abenomics working? All from a low base.
All stacks up to more USD strength. Be a hero, stand in front of the train. Be sure to make a will first.
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