FOREX 4 minutes to read

Opportunity knocks....

Summary:  A President Trump tweet sent the US dollar soaring overnight and New York traders added to the gains this morning. Global equity markets sank, oil prices plunged and safe-haven currencies are in demand. Then again, it may all be a mirage.


President Trump has a history of inflammatory tweets and more often than not, they are just hot air. The president is a showman. He loves the spotlight and obviously enjoys wreaking havoc in financial markets. He is also not stupid. He knows that the UK and Japan are closed for national holidays. He also knows that those closures remove a serious chunk of market liquidity, giving his words a much more significant impact than what they would otherwise warrant.

Arguably, Trump is grandstanding and giving the media something to write about on a slow news day.  Treasury Secretary Mnuchin indicated good progress was made and last week suggested that the trade talks were on their final laps. So far, China’s 100-strong trade delegation is still coming to Washington for talks on Wednesday.

USDCAD rallied from 1.3421 at Friday’s close to 1.3491 this morning on the back of broad US dollar moves and a steep plunge in oil prices. WTI oil, at $61.68 is well-above its session low of $60.07, but USDCAD has ignored that rally. USDCAD is highly correlated with the US dollar Index. That correlation broke down on Friday but may be getting ready to re-correlate. If so, USDCAD may stay below resistance at 1.3490, and retreat to 1.3420.

Not surprisingly, Wall Street has taken it on the chin this morning. The three major indices are down about 1.3% in early trading. There isn’t any US data available to offset trade war jitters leading to some profit-taking.
Chart: USDCAD/USDX hourly. Source: Saxo Bank
Disclaimer

Saxo Capital Markets (Australia) Pty Ltd prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Combined Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)