The US President says the dollar will become strong and stronger in his typical hyperbolic style. He “wants to see a stronger dollar” and says his Treasury Secretary’s words: “a weak dollar is good for the US” were “taken out of context” although it is hard to understand Mnuchin’s comment differently.
The US dollar is jumping across the board:
- EUR/USD dipped towards 1.24 before stabilizing. Draghi’s failed jawboning sent EUR/USD above 1.25 earlier.
- USD/JPY recaptures 109 and reaches 109.10 after trading around 108.50.
- GBP/USD dropped under 1.42 after hitting key resistance earlier in the day.
- USD/CAD rises back up to 1.2355.
- AUD/USD is down to 0.8054. It had already reached an important cap.
The US dollar’s sell-off was quite stretched. Markets took every signal to sell and the bounces were limited. So, a correction is natural.
As Trump tends to use hyperbolic language and also tends to contradict himself, the big question is: do we have an opportunity to sell the dollar?
So far, this is a correction and not a change of course. Sure, the dollar could go up and up and Trump’s words could mark the turnaround point. But they could also be just a temporary rise within a bear market for the US dollar.
Here is how the move looks on the EUR/USD 30-minute chart:
USD/JPY chart, showing a big rise: