Ahead of the NFP release in less than twenty-four hours, the USD broke higher against its major counterparts. This time, tariffs aren’t the cause, but solid U.S. economic performance.
The ADP (private payrolls) number the other day came in at a solid 230k, crushing the 185k expectations. Immediately after, the ISM Non-Manufacturing rose well above the 60 mark, showing an economy that performs exceptionally well.
On top of that, the Fed Powell was on the wires on the same day, confirming the rates in the U.S. are still accommodative. The combination of Powell’s speech and staggering economic data pushed the USD higher across the board.
USD/CHF broke above 0.99 and, at the same time, the EUR/USD fell below the all-important 1.15 support. But perhaps the most impressive advance belongs to the USD/JPY pair. For the last few months, it rose from below 110 to 114, in a steady move, with little or no retracements.
We’ve long argued here that the path of least resistance for the summer course and into the fall is for a higher USD. Despite the trade risks everyone complained about, here we are: the U.S. equity market and the USD making new highs.
George Soros was the first one to develop an exciting theory claiming that when a nation’s twin deficit rises, the currency will, eventually, rise too. This summer and fall price action is the perfect example that macro still beats micro, despite contrarian news.
As for the crypto-market, Ripple was all over the place lately. With more and more businesses incorporating the new technology, it seems that only the sky is the limit.
However, the technical picture requires caution. While Ripple rose to almost 0.80, it failed to break the series of lower highs, characteristic of a bearish market. It formed this series since the peak in last December, and it remained in place ever since.
With the USD ripping higher and the lower highs series still in place, bulls must be aware of this being just another spike. The fact that it trades now well below 0.55 seems to confirm that theory.
The last 2018 quarter will be one to remember. With the USD and U.S equities at the highs, retail traders seem to be caught on the wrong side of the market: short USD and long crypto. How many will survive this combo?