Dollar Surge Continues as Spotlight Moves to Potential Mar Hike

Talking Points:

– USD-strength has continued a top-side pierce that started on Thursday, as comments from San Francisco Fed President, John Williams, helped to stoke U.S. rate expectations-higher.

– This was followed by a well-received Joint Address to a Union by President Trump, and some hawkish explanation from remarkable Fed-dove, Lael Brainard. This has serve driven rate expectations for a Fed’s subsequent assembly in Mar (two weeks away).

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The Federal Reserve was steadfastly hawkish by a initial half of February, though this did small to pierce behind a before strength that had driven a Greenback-higher in a ancestral pierce after a U.S. Elections.

Two weeks ago, at a Fed’s twice-annual Humphrey-Hawkins testimony, Fed Chair Janet Yellen non-stop her remarks by observant that she felt a bank should travel rates ‘sooner rather than later,’ and this gathering a Greenback adult to a pivotal insurgency turn during 101.53. This is a 50% pen of a Jan move-lower, and if a U.S. Dollar was means to poise a sustained-break above this level, a available of top-side delay would seem intensely some-more attractive. But that was not to be, during slightest dual weeks ago, as a second day of that testimony elicited a annulment that brought behind bearish cost movement to a Dollar.

Then final week, the recover of a Fed assembly minutes from a before rate preference during a finish of January/early Feb were expelled and, once again, desirous a discerning hitch of USD-strength. But, usually as we saw in a week prior, sellers came-in during this pivotal insurgency turn of 101.53, and a U.S. Dollar unsuccessful to move-back into that bullish-trend state that had dominated FX markets to tighten 2016.

But this Wednesday was distant different…

The headlines are expected comparing many of this new pierce in a Dollar with President Trump, as has turn sincerely customary media protocol. But if we demeanour underneath a surface, there are some contributing factors that are removing traders to hastily-increase probabilities for a rate travel in March, and that’s been a unchanging carol of hawkish Fed-Speak. Just hours before President Trump delivered his Joint Address to a Union, San Francisco Fed President John Williams gave some really hawkish comments to markets; and for a centrist as Mr. Williams is mostly deliberate to be – this showed that a Fed competence be closer to that subsequent rate travel than many were formerly expecting. This expected carried substantial weight and, as we looked during yesterday, the Dollar’s bullish pierce indeed began well-ahead of a Joint Address to a Union, right as Mr. William’s comments were filtering into markets.

And afterwards yesterday – another warn happened when remarkable pacifist Lael Brainard indicated that she was warming adult to a thought of a travel in March. Ms. Brainard has been intensely clever in her comments per rate hikes in a past, and mostly errs on a side of caution. But yesterday, she indicated that she feels rates are prepared to arise ‘soon’ and this has usually serve contributed to a thought that a bank competence be looking during a travel in March.

The net-impact of this pierce was a U.S. Dollar finally putting in a daily tighten above a pivotal insurgency turn of 101.53, giving a coming that USD-strength is on a return. On a draft below, we demeanour during a 4-hour draft of this new top-side breakout.

Dollar Surge Continues as Spotlight Moves to Potential Mar Hike

Chart prepared by James Stanley

USD/JPY Showing Increased Rate Hike Odds Fairly Prominently

One of a adored USD-strength setups that we’ve been deliberating for a improved partial of a past few months is in USD/JPY. Given a sincerity of a slip during a ‘Trump Bump’ holding place after a election; and afterwards also given a more-shallow retracement that was seen during January, and USD/JPY remained an appealing venue to watch for a lapse of USD-strength.

But being an appealing venue doesn’t directly unlawful bulls into a market. It merely provides adequate proclivity for support to hold, and this was really many what we saw around February, as buyers reason adult price action during a pivotal section from 111.61-112.40. This kept USD/JPY in a mark where, once bullish drivers returned to a ravel cost movement could move-higher; and that’s precisely what happened on Wednesday of this week, where a span had formerly tested a bottom of that support section during 111.61. But as Mr. Williams comments came into markets and then, later, President Trump’s debate gathering confidence-higher; and strength began to uncover again in USD/JPY.

At this point, we’re now using adult wedge/trend-line insurgency after a sincerely discerning ramp-higher in a pair. For those that aren’t nonetheless long, available a top-side mangle of a 114.50 turn could uncover that bulls competence be means to extend a move; during that indicate looking for a ‘higher low’ indicate of support could open a doorway to bullish trend-continuation strategies.

Dollar Surge Continues as Spotlight Moves to Potential Mar Hike

Chart prepared by James Stanley

If USD/JPY does face near-term resistance:

For traders that don’t wish to initial wait for a pierce to enhance before plotting intensity support or entrance points, near-term cost movement could be employed in a eventuality that this trend-line of insurgency holds. Below, we demeanour during a shorter-term pierce in a bid of anticipating intensity support levels should this near-term form of insurgency hold. Given how aggressively prices have ramped-up on this many new top-side run, traders would expected wish to bonus those swings or a intensity for those swings to uncover behind adult for support. Instead, before cost movement can yield a integrate of opposite zones of seductiveness in a eventuality that buyers are incompetent to continue this top-side pull in a near-term.

Dollar Surge Continues as Spotlight Moves to Potential Mar Hike

Chart prepared by James Stanley

— Written by James Stanley, Analyst for

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