Many of you asked me to explain why the dollar lost so much ground lately especially versus the euro!
Well my friends, NO it is not ONLY because of TRUMP! Let me explain why:
First, the Eurozone economy is improving and the European Central Bank is looking to end the stimulus pushing both currencies closer together. Second, the political framework in Europe is smoothing, clearing uncertainties and panic mood. Third, on the technical side, some short covering probably led the Euro to overshoot fast!
The role of Trump…
We can now add to these the TRUMP effect as he threatens to shut down the government and lags on his promises (taxes & regulation) so far. Also, The fact that the US central bank may not hike rates more than once this year contrary to forecast is disappointing to many investors and not helping USD either! Rising interest rates are traditionally linked to stronger currencies, since higher rates attract investment.
Oh Oh… But the weakness of the U.S. dollar is another headache for the ECB
Therefore be careful! This upside trend may not last forever… Unlike a never ending love story! The Euro strength acts as a deflationary pressure at a time when the central bank wants to bring core inflation up! Aieee Draghi that could hurt!
Now time for a Technical hint by D …
The top of this EUR/USD leg is situated around 1.2140 and a correction from there can take it back to the 1.15 levels. This is just a thought; you guys should calculate well the risks before rushing into any trade at any level! Stay safe amigos 🙂