RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

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. John made his move to the commodity industry at the end of 2005, and began his path at Lind Waldock, at the time the largest retail brokerage division worldwide. John did his undergraduate work at Robert Morris University in Pennsylvania from 1999-2003, where he was a 4 year varsity basketball letterman.  A self-professed “Macro Trader”, John uses a multi-factor fundamental and “quantamental” trading model in distinguishing market cycles based upon the accelerations or decelerations of growth and inflation metrics. His technical and quantitative approach is heavily reliant upon trend and market range analysis via a custom built standard deviation system in helping him make probability-based market decisions. John is an avid reader of all things pertaining to finance, and behavioral economics. Click here to sign-up for John Caruso's Trading Coach Insights. Daily information and insight on all futures marketsin ranging from metals to equities.
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