The down-trend in the Dollar continues with the Greenback sinking to another fresh low this morning, temporarily falling below election night support to set fresh 8-month lows. The swing-low from election night came-in at a key level of 95.86, which is the 50% Fibonacci retracement of the 16-year move in the Dollar.
Meanwhile, rather brisk up-trends have developed in European and British counterparts as both the Euro and British Pound have caught concerted bids to push-higher. While the Euro has been trending-higher for much of 2017 as investors have been attempting to front-run the ECB’s stimulus exit, the Bank of England joined the party yesterday when BoE Governor Mark Carney alluded to the potential for interest rate hikes in the U.K. This is a pretty big deal considering how incredibly dovish Mr. Carney was around Brexit, following up the referendum with a ‘bazooka’ of stimulus that led the bank to purchasing a considerable chunk of the British Corporate Debt market.
The excitement around these themes brings along the potential for the continuation of trends as we move into Q3, which begins next week. Below, we look at three of the more active FX markets to investigate strategy for each.
The Dollar (as shown with DXY)
The U.S. Dollar is incredibly weak right now, currently catching intra-day support off the longer-term Fibonacci level mentioned above, which is confluent with the support area of the 2017 bearish channel in the Greenback. Likely key here is picking your spots: While the Dollar has been incredibly weak against the Euro and the Pound, strength has shown in the Greenback against the Japanese Yen, and this very much echoes the ‘reflation’ trade that was seen in Q4 2017 after the Presidential Election. So, while traders would likely want to look for some element of USD-weakness against both the Euro and British Pound as we move into Q3, that short-USD risk can be offset, to some degree, in long USD/JPY positions.
