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Market Outlook: Dollar comments all round

Strong dollar policy abandoned
January 26, 2018

On Wednesday US Treasury secretary Steven Mnuchin abandoned decades of use of the ‘strong dollar policy’ mantra stating the obvious:  a weak dollar is good for US trade and therefore benefits the nation over the long term.  Yesterday at the ECB’s rate-setting meeting president Mario Draghi spat out these words: ‘’the exchange rate has moved…due to exogenous reasons that have to do with communication.  Not by the ECB, but by someone else.  This someone else’s communication does not comply with the agreed terms of reference.’’  Later in the day President Trump told CNBC, ‘’the dollar is going to get stronger and stronger and ultimately I want to see a strong dollar’’.

In an interview on CNBC television yesterday the governor of the Bank of Canada, Stephen Poloz, said bitcoin trading was ‘gambling’ and that his organisation was looking into cryptocurrency regulation.  Echoing current thinking he added that blockchain technology was a ‘true piece of genius’.  

DAX 30

A dose of the jitters and the MACD potentially turning negative today as traders clock the value of the euro – which has appreciated by a cool 18 per cent in the last 13 months. 

 

SHORT TERM TRADER:  Tiny short at 13360; stop above 13600.  Target 13000.

 

POSITION TAKER:  Square.

FTSE 100

Momentum suddenly turned bearish as we hover below the neckline of a tiny head & shoulders top and support at what had been long term resistance.  Weekly and monthly closes below 7600 would seriously undermine the bullish case.

 

SHORT TERM TRADER:   Square.

 

POSITION TAKER:  Square.

S&P 500

Holding at the highs propped up in part by US dollar weakness.

 

SHORT TERM TRADER:  Square.

 

POSITION TAKER:  Square.

BRITISH POUND/US DOLLAR

Strong bullish momentum means that yesterday’s set back is holding first Fibonacci retracement support at 1.4140.  This morning’s bounce from here could negate yesterday’s shooting star candle and the market might manage a weekly close at the precise point we were at on the day of the referendum result - $1.4455 – which would be no mean feat.

 

SHORT TERM TRADER:  Looking to re-buy depending on where we settle this week and this month.

 

POSITION TAKER:  Long at 1.3730; stop below 1.4000.  Holding out for my second target around 1.4600.

EURO/US DOLLAR

Despite yesterday’s very big shooting star first Fibonacci retracement support is also holding here and helping the euro higher this morning.  A monthly close above $1.2300 should add to bullish momentum because it is the half-way point between the 2014 high and 2017 low.

 

SHORT TERM TRADER:  Took profits this morning at 1.2475 and will re-buy depending on this week’s and this month’s close.

 

POSITION TAKER:  Long at 1.2200; stop below 1.2290.  First target 1.2600, then maybe 1.3000.

GOLD

Many commodity markets racing to keep up with the rapidly shrinking US dollar, a trend that is clear to see started 13 months ago.  Watch for a weekly close above 1360 to confirm a significant break.

                            

SHORT TERM TRADER:  Square.

 

POSITION TAKER:  Square.

Nicole Elliott is a long-standing Member of the Society of Technical Analysts and has taken over the IC’s trading coverage.  She is regularly interviewed and quoted by the financial media, is a conference speaker, and author of several books on charting.