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*Good morning/afternoon everyone!*
As U.S. and South Korea begin their military exercises, the U.S. dollar is trading lower against all of the major currencies except for the Canadian dollar and Swiss Franc. U.S. rates are also moving lower, indicating that investors have not started to buy dollars (yet) into Jackson Hole. While we think the dollar will be pressured by geopolitical risks at the start the week, we ultimately believe that it will rally on Jackson Hole because practically ALL members of the FOMC believe that balance sheet reduction should begin next month. And they won’t miss the opportunity to remind/prepare the market for this big change. The sell-off in the Swiss Franc vs. USD and EUR confirm that investors are not overly concerned or nervous that the military exercises will boil over into something bigger. Its been a relatively quiet morning with commodity currencies leading the gains, USD/JPY testing and so far finding support near 109 and EUR/USD struggling to break above resistance at 1.0770.
*The MAIN THEMES I see today are*
+CAD, +AUD, +NZD
mildly -USD, -JPY
1. Sell USDCAD at market now 1.2592, Stop 1.2632, Target 1.2572
2. Sell EURAUD at market now 1.4828, Stop at 1.4868, Target 1.4808
3. Sell EURJPY at market now 128.30, Stop 128.70, Target 128.05