Action: Short Dollar Index (DXU9 Saxo Trader) @94.41 with stop/loss @ 97.80 on daily close above
Why: Aggressive Fed easing, weaponizing of foreign exchange by President Trump and technical break
Background: The focus from Trump on ECB, the concept that FED will and could cut rates forcing 10Y US to 100 bps if not zero long-term is in play, for now Fed is cutting (wrongly) on inflation by Q4 they will in panic on growth – throughout this an engineered weaker US Dollar is the go to play by Fed and US administration
I have for better or worse been doing this job for 30 years – NEVER EVER have I seen a foreign leader, nor an American President comment on another regions central banks action until this week:
And as the Daily Shot tweeted this morning: Chart- Currency Wars
https://twitter.com/SoberLook/status/1141450710921490433/photo/1
I have been a Dollar bull for the longest time as I firmly believe in the liquidity is tight in US dollar funding in particular for non-US entities, however its also clear to me that for this trade war, lack of globalization to work, it will need a lower US dollar.
A lower dollar will help: US export, Emerging Markets, growth and overall liquidity, but most importantly the comments from Trump indicates he and his administration will pursue policy of lower dollar, either directly through verbal intervention or by forcing Fed to cut all the way to 100 bps or even zero bound.
Recent weeks have told us that FED academically is ready to embrace 'zero bound' and with US election cycle starting in earnest this week with Trump 'present' to stock market (promising to meet President Xi) – the US dollar may be about to be 'weaponized'
Presently in China – I got lot of new information China which will be forthcoming in wider analysis next week.
Safe travels,
Steen
Med venlig hilsen | Best regards
Steen Jakobsen | Chief Investment Officer
Saxo Bank A/S | Philip Heymans Allé 15 | DK-2900 Hellerup
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