How I’m Trading The Dollar Today
While pre-FOMC trading has a
tendency to be range-bound and uneventful, this time appears different:
- The dollar is at key support
- The RBA (Reserve Bank of
Australia) has removed its’ tightening bias
The dollar’s (DXC) sell-off
despite better-than-expected economic data over the last week or so has placed
the greenback in a vulnerable technical position as noted in the chart below.Â
While the market has likely priced in a rate hike tomorrow, the accompanying
statement is likely to prove pivotal as to where the dollar goes from here.
While purely from a macro
standpoint, the current price action in the dollar seems at odds with economic
and interest rate outlooks, so what would seems like a conducive environment for
the dollar has been anything but recently. However, as traders, what seems
‘logical’ is sometime misguided and consulting charts rather than viewpoints is
far more objective. This is clearly the case presently.
Yesterday’s decision by the RBA
clears the way in our opinion for lower levels during the remainder of the
year. While we are willing to trade this on a short-term and longer-term basis
— for now, we will remain short (from Sunday) as a short-term trade until the
DXC technical picture becomes a bit more clear. However, with rate
differentials likely to continue to contract between Australia and the U.S., it
would seem that only continued higher commodity prices, mainly gold and base
metals will keep a bid in AUD.
As always, feel free to send me
your comments and questions.
Dave Floyd is President of
Aspen Trading Group, which provides research/trade ideas on the FX and
equity markets as well as analytical software. Aspen Trading Group is based in
Bend, OR.
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