Duh, They Want It That Way …
As hard as Trump and Mnuchin are fighting to keep the cost of financial stimulus low, they really want it because it weakens the dollar. I know those guys like to posture as Dollar Hawks but that’s just to protect the currency from manipulation and maintain a conservative posture. In the long run, looking at things from the perspective of protectionism, free trade, and import/export imbalances, you have to admit it makes sense for them to want a weaker dollar. The weaker the dollar is the more U.S. goods foreign money can buy which is a nice little incentive to boost foreign investment and spending in the U.S. Spending that will support the economy, lift the dollar, and the rest of the world along with it.
Anyway, back to the original intent of this post. The dollar is weakening and the three major dollar pairs are all ready to make a move.
The EUR/USD – A Top, I Don’t Think So
The EUR/USD has made a nice move up from its lows earlier this year. The pair is up ten handles since the spring, quite a robust move, and I don’t think it is over. The price action looks a little toppy but, until a reversal is confirmed, is also consistent with consolidation within the uptrend. Assuming the next round of stimulus is passed, this pair should break out to the upside sometime soon after. Resistance is near the 1.190 level which would also mark the top of a bullish triangle. A move higher could confirm continuation and bring some projections into play that could equal another ten handles or roughly 1000 pips within a matter of weeks.
The GBP/USD – Brexit Is Still Happening
The GBP/USD is similarly positioned to the EUR/USD if a little stronger looking. This pair is also moving higher and appears as if it will continue moving in that trajectory in the near-term. The risk here is that, although a continuation pattern may be forming, there is a resistance target just above today’s trading levels that could contain price action. I expect to see this pair hit 1.3200 and 1.3400 within the next few weeks. A bigger move is possible, lets see how the pair handles resistance before getting to bullish.
The USD/JPY – It Looks Like A Bottom But …
The USD/JPY fell to the bottom of a range and looks like it may be bottoming but I’m going to warn you, don’t trust it. The pair may have hit a support zone that used to be the bottom but the bottom is much deeper than this. The price action looks bullish, from the bullish perspective, but when considered from the bearish perspective confirms the downtrend and sets the pair up for a big fall. I think 105.00 and 104.00 are conservative targets, there is a great chance this pair will retest the 101.00 to 102.00 level.