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Metals

Greater Risk of Downside in the USD Ahead?

Posted 11/02/2018 10:10AM CT | John Caruso

A stellar NFP jobs number was reported this morning, showing an increase in payrolls to the tune of 250K vs an expected 200K in October. Wage growth was what many traders were focusing on and that expressed a 3.1% y/y reading better than the expected 3.0%. The USD is bouncing back slightly from yesterday’s smack down and looks as if it may actually finish out the week in the red. Thus far, it has been a rather feeble attempt at a rally in the dollar if you ask me. Is this the beginning of the end for the Dollar?  Maybe, maybe not, but our call has been that the USD has more risk on the downside as we wade thru the slowing of the U.S. economic cycle. We were bullish on the dollar back in the spring and through the summer (I’ve got the time stamped emails to prove it), as there was big flight of capital out of emerging markets, European, and Asian currencies as they’re cycles were breaking bad. That left the USD as the only safe haven instrument in the currency space – Remember the U.S. economy was still in an expansion cycle in GDP/Inflation/ and Corp profits and earnings. Looking forward, the dollar looks to have direct competition for its “flight to safety” status, in the likes of gold, fixed income via treasuries, eurodollars, FF futures etc, (although the rallies have been shallow, we think that’s going to change) and utilities – not to mention when the Q4 data begins to be reported “less good” on a y/y basis – and perhaps the Fed takes it’s foot off their “hawkish” stance on interest rate policy, which we also think is a likely scenario. 

U.S. Dollar Index Weekly Chart

U.S. Dollar Index Weekly Chart

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John Caruso

Senior Market Strategist
Follow John on Twitter @JCarusoRJO. John began his career at Wilshire Quinn Capital, a Wealth Management Firm based out of Los Angeles, California. Prior to becoming a broker he did some individual trading on his own, where he first began to study and interpret different market strategies and ideas. In 2006 John moved over to Lind-Waldock where he began to service clients as a professional broker. He joined RJO Futures in 2011.
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