RJO FuturesCast

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Currencies

US Dollar Index Races to YTD Highs

Posted 05/04/2018 9:05AM CT | John Caruso

The US dollar has stepped up to the forefront of the currency space over the past 2-3 weeks and looks like there’s more room to run.  Inflation related data has seen a recent acceleration in the US with the PCE Index hitting 1.9%, just under the Feds 2.0% target for inflation.  As US interest rates have chased inflation expectations higher, the US dollar has followed suit, climbing more that 400 points since its February low of 88.25 (Cash Index).  Adding further fuel to the US dollar’s fire is the broad based slowdown in both growth and inflation across the Euro Zone.  Euro Zone core CPI decelerated to 0.7% y/y, and should set the tone for a dovish Mario Draghi and ECB.  On top of the slowing inflation data in the EZ, up until just two weeks ago, the euro had a record net spec long position according to the CFTC, and now we’re seeing the long side trade unwinding, adding further selling pressure.   

As we move thru the 2nd quarter, we still continue to believe inflation is likely to accelerate in the US, which should keep the USD in favor vs all other major foreign currencies.  As always, our opinion remains data dependent to inflation expectations and the direction of interest rates.  For the time being we’re buyers of the US dollar on dips/corrections to immediate term support levels.

US Dollar Weekly Chart

US Dollar 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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