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EURUSD – Fade 1.07
President Trump jawboned the U.S. dollar this afternoon sending EUR/USD sharply higher. In an interview on CNBC, Trump said the dollar is getting too strong because “people have confidence in me.” The market latched onto these words but we think his comment about U.S. rates and China’s currency manipulation are far more important. He confirmed that the Treasury would not be labeling China a currency manipulator in their upcoming report because it would hurt talks on North Korea but he also indicated that he likes a low interest rate policy. Considering that the Treasury is “very close” to filling the open seats at the Fed according to Mnuchin, chances are he’ll be nominating doves, which is the only legitimate reason for the dollar’s low volatility fall. Its not the first time that President Trump criticized the strong dollar but when coupled with his plans to bring in more doves, it created the perfect catalyst for a late day slide in the greenback. Will these losses last? Probably not. While the dollar could extend a bit lower, the upcoming Easter holidays could encourage profit taking on short dollar positions. We like buying dollars against the euro ahead of next weekend’s French election because according to the 1st round Opinionway French election poll, Le Pen has a marginal lead over Macron. Recent terrorist attacks makes her anti-terrorism, anti-immigration stance more attractive and investors are getting jittery. So while the EUR/USD traded sharply higher today, we think the gains won’t last as French election volatility hits euro trade.
Technically, EUR/USD loves to gravitate to round numbers so we could see the currency pair extend to 1.07. We’ve set our sell order right underneath the 20-day SMA which currently hovers near 1.0715. If EUR/USD rejects that level, we could easily see a move back down to 1.06