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Foreign Currencies Look to Bottom in Back Half of 2019

Posted 05/30/2019 9:09AM CT | Ian Bannon

The U.S. dollar opened at 98.04 on Thursday and has inched up in morning trade. Trading near its weekly highs, the USD remains in a bull trend as safe-haven buying interest continues to elevate the reserve currency of the world. As long as anxiety persists in global markets, the bull camp in the dollar is unlikely to be discouraged. Currency investors worldwide rely on the American economy when risk sentiment is high, especially in an environment where other developed economies are not holding up as well in the face of slowing growth worldwide. U.S. scheduled data is unlikely to reverse this trend, despite an uptick in jobless claims (215K vs 212K last week) and an expansion of the trade deficit coming from this morning’s data. Furthermore, Q1 GDP was revised to 3.1%, down 0.1% from the initial reading. This supports the simple fact… growth is slowing. This is reflected in the current U.S. stock market correction as well. Clearly investors are skeptical, and a continued “risk-on” mindset will likely stir the Fed to move from neutral to dovish. There is increasing potential for a rate cut later in the year, which would weaken the persistent greenback. As other currencies trade against the dollar, there is reason to believe certain currencies are in a bottoming process and the dollar appears to be topping. The Japanese yen broke out of its consolidation pattern earlier this month and has moved to bullish trend vs the USD, aided by impressive Japanese GDP numbers. As deep bear tracks persist in the euro, largely due to a growing Italian budget deficit, and the British pound falls to its lowest levels of the year, safe-haven buying interest may be observed in the Swiss franc as an alternative currency. Technically speaking, the downtrend in the franc appears to have found a bottom, as an early May reversal seems to be holding support.

Swiss Franc Jun ’19 Daily Chart

Swiss Franc Jun '19 Daily Chart

 

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Ian Bannon

Market Strategist
Ian’s interest in trading began with the stock market after graduating from Purdue University with a degree in Economics and a focus in international business. A natural strength for numbers, trends, and pattern recognition, in conjunction with a curiosity to understand the big picture has enabled a desire to understand market behavior. Ian managed his own stock account before moving into the futures arena because of the wide scope of trade-able sectors and the ample amount of fundamental support behind these larger-scope markets.
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