The US dollar has come under some strong selling pressure today after recent comments from President Trump were very much in the bears favour. While previously campaigning on a platform of change in the last few hours he has a done a number of U-turns on economic policy, including: being open to extended Yellen in the FED, and stating that low interest rates are good for the economy and he wouldn’t mind them remaining low for some time. On top of this he has backed down his aggressive rhetoric against China being a currency manipulator. But the main point has been very clear, and that is Trump does not want a strong US dollar – which make a lot of sense when you consider his push to boost the US economy and drive home manufacturing and job creation.
For the global markets there are always going to be strong winners and the EURUSD has been one today, and may continue to be so if Trump continues the way he does. With the European Central Bank looking to wrap it’s stimulus to the economy and the US economy booming it could have nice flow on effects for the Euro. Throw in the addition of Trump talking down the USD and we could see the EURUSD continue its bullish wave pattern as of late, while also being supported by bullish trend line. Right now the EURUSD is testing resistance at 1.0676 with the potential to extend higher and push on 1.0767 and 1.0869. Expectations for a third wave are generally the strongest, but it would require the selling in the USD to continue and for the EURUSD to ignore the 20 day moving average as it shifts higher.
Gold has also been another big winner as of late with Trump and the weakness of the USD. While the market traditionally treats it as a hedge against inflation, in this case that is most certainly not the case. Thus far the market has been treating it as a store of value in the event of a calamity, as many traders are worried over Trump and his words over North Korea and Russia. Both countries which can stir up global unrest and could lead to issues further down the line. For now though the USD weakness has been a boom for the precious metal as for the second straight day we saw strong extensions for gold.
It looks very much the case that gold will attempt to test 1290 on the charts, but I am unsure if it will have the legs to push through the bearish trend line that has been in play since July 2016. A failure at this level would send gold downwards, with an extension to support at 1263 being a likely scenario. One this is acutely clear though for gold, and that is the Trump effect can lead to big swings which ignore technical’s but also help drive volatility which in turn does help traders.