A trifecta for the US Non Farm Payrolls data this morning, with headline jobs beating estimates (223K vs 190K expected), wage growth accelerating both m/m (0.3% vs 0.1%) and y/y (2.7% vs 2.6%).  The US dollar likes the data, pressing higher by 20pts this morning to 94.17 this morning and +2.6% ytd.  The USD has also drafted some support from a possible impending Italian debt crisis.  The euro continued it’s decent this week, falling as low as 1.1526 (June basis), a level not seen since July of last year.  Despite the negatives surround the euro, we did trigger immediate-term oversold levels on Tuesday and the market has since bounced to 1.1690.  Anxiety over Italy seems to have cooled off a bit in the near-term, but we certainly don’t believe these issues are going away any time soon.  We are advocates of selling into rallies in the euro closer to 1.1800 vs the USD.  The US Federal Reserve is on deck next week, where we’re expecting another 25 bps interest rate increase.  How will the Fed guide us moving forward is the question.  This will be our second interest rate hike this year, and we’re expecting one more in the back half of 2018.  Three rate hikes have been priced into the market, and the question is whether the Fed will open the door for a fourth rate hike, which we believe the market has not priced in.  Look to stay on the long side of the USD/EUR trade.  Watch for dips in the USD closer to 93.00 and euro rallies closer to 1.1800 is how we’ll suggest to manage the trade. 

US Dollar Weekly Chart – Bearish to Bullish transition

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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