Obstinately resilient USD
Tackling the obstinately resilient USD will be a significant discussion next week after a week dotted with month-end flows and correctly modelled USD demand.But traders appear far too eager to get back on the dollar short roulette wheel even more so with the seasonal proclivity to typically dampen USD sentiment in April. But a word of caution, Apil showers tend to bring May flowers as far as the dollar is concerned and that causality alone should keep bearish dollar views in check.
The month-end flow has challenged some long-held market persuasions, and none more so than the USDJPY shorts after the market went all in in the low 105’s during the FANG meltdown, only to get summarily spanked this week. While it’s best to square positions ahead of weekend headline risk, the dollar short signals are not as bright as dealers idle banter would suggest.So during the interim, my strategy is to keep the powder dry until we get a convincing signal on the Central Bank Front or a dim view of US inflation before re-engaging the dollar downside. Given the evolving curious currency conundrum, there’s nothing wrong with taking another week off in currency markets as interest rates trades are providing a much more unobstructed view of the broader Macro landscape. But more to the point, don’t write off dollar yet – it’s been a surprisingly good week for the Greenback
Equity markets are coming off an exceptional rough patch in March weighted down by tech sector woes, but pared back losses heading into the long weekend. I wouldn’t make much of a short covering rally, especially with the S&P 500 technology sector ending the month 4 percent lower
Geopolitical anxieties, especially the tensions between Saudi Arabia and Iran, continued to bolster prices. And while the never-ending debate between US crude inventories and OPEC supply curbs cont.inues to provide short-term trading opportunities but price action is apparent, and we should expect a test of 2018 highs sooner rather than later.
Consolidation rules the roost and expectedly so. After the shellacking on Wednesday, there’s apparently little appetite from Gold investors to get back in the saddle. Weekend headline risk permeates, and with the dollar coming off a surprisingly strong week, the jury remains out.
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