Macro View:
2018 has been a very exciting year for the dollar thus far. Volatility has sky rocketed in the last couple of months, the FED has indicated a reduction in QE and Donald Trump has been tweeting away. In my view, I believe the dollar holds a more bearish outlook due to the following factors:
1. Rise in political tensions between China and US
2. Possibility of trade wars against the US’s main trading partners (China, Europe, Mexico and Canada)
3. Rising yields in a negative outlook environment*
4. We are entering in the latter of the business cycle
*In theory we know that generally rising yield rates are better for the currency i.e. higher yield rates stronger dollar. However, this is true only in the context of a positive outlook environment that is driven by higher economic prosperity. If however the FED is raising rates in a negative economic environment then these rise in rates will cause the demise of the dollar as the economy is being squeezed. Additionally, rising rates will cause massive sell offs due to carry trades.
Technical point of view:
1. The dollar has sustained somewhat a decent bull run over the last 2 months so I’d expect position holders to start closing some of their positions and take profit
2. We are continuously making lowers lows on the shorter time frame indicating additional bearish sentiment
3. Price reacted nicely off a key psychological level (95.00)
I would be setting my stop loss above 95 handle and take profit around 88. My risk to reward ratio is 1:3.3
After understanding in general where the dollar is heading we can (in some sense) extrapolate these directional bias to currency pairs such as EURUSD (long), GOLD (long), and USDJPY (short)
** Note I have only gotten back to trading not too long ago so this is my first attempt and it is not trading advice but I am just writing it here to keep a log of my trades.**
2018 has been a very exciting year for the dollar thus far. Volatility has sky rocketed in the last couple of months, the FED has indicated a reduction in QE and Donald Trump has been tweeting away. In my view, I believe the dollar holds a more bearish outlook due to the following factors:
1. Rise in political tensions between China and US
2. Possibility of trade wars against the US’s main trading partners (China, Europe, Mexico and Canada)
3. Rising yields in a negative outlook environment*
4. We are entering in the latter of the business cycle
*In theory we know that generally rising yield rates are better for the currency i.e. higher yield rates stronger dollar. However, this is true only in the context of a positive outlook environment that is driven by higher economic prosperity. If however the FED is raising rates in a negative economic environment then these rise in rates will cause the demise of the dollar as the economy is being squeezed. Additionally, rising rates will cause massive sell offs due to carry trades.
Technical point of view:
1. The dollar has sustained somewhat a decent bull run over the last 2 months so I’d expect position holders to start closing some of their positions and take profit
2. We are continuously making lowers lows on the shorter time frame indicating additional bearish sentiment
3. Price reacted nicely off a key psychological level (95.00)
I would be setting my stop loss above 95 handle and take profit around 88. My risk to reward ratio is 1:3.3
After understanding in general where the dollar is heading we can (in some sense) extrapolate these directional bias to currency pairs such as EURUSD (long), GOLD (long), and USDJPY (short)
** Note I have only gotten back to trading not too long ago so this is my first attempt and it is not trading advice but I am just writing it here to keep a log of my trades.**