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Greenback Facing Headwinds

Published 02/19/2019, 02:23 PM
Updated 07/07/2019, 08:10 AM

During the Tuesday session, we have seen a significant amount of US dollar selling. Whether it be against the Euro, the British pound, or perhaps more telling, gold, the greenback has been hammered. There are a lot of different reasons for US dollar weakness, not the least of which will be the Federal Reserve.

Recently, the Federal Reserve has stepped away from its hawkish stance, and now we are awaiting the Federal Open Market Committee Meeting Minutes, which will give us an idea of just how doubly some of the members are. It appears that currency traders are willing to step in and short the greenback in anticipation of a softening stance in the notes as well. Beyond that, we have several other factors that could be complicating the path forward for the US dollar.

With the Chinese and the Americans meeting this week, traders are starting to question whether or not anything will be done in that situation. Quite frankly, there are a lot of issues out there that the countries are far and wide apart on, so it’s difficult to imagine a scenario where good things come of this situation. While the US dollar may gain against some currencies in that scenario, this has people heading to other currencies such as the Euro, simply as a way of getting out of US dollars. By far, the cleanest play has been the move above the $1325 level in the gold market, and it now looks as if we are trying to break out to much higher levels although we are in an area of extreme noise.

Another potential driver of US dollar soft as might be the stock market in America. While it has rallied slightly during early trading in the United States, we are heading towards massive resistance just above, and if the stock markets roll over, there will be less monetary flow into the United States. By default, the Euro could find a bid, simply because it is a major support simultaneously. This doesn’t look likely to be the death knell of the greenback, simply that it should continue to soften in the short term. This of course all could change if there is some type of beneficial trade deal coming out of the Sino-American meetings.

At this point, technical patterns on currency charts as well as commodities does suggest that we should see a little bit in the way of softness with the dollar. Beyond that, we have seen a deterioration of economic numbers in America, and of course have a minefield of potential issues coming out of the trade talks. It’s very likely greenback bulls could have a couple of rough days.

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