Weekly review

Following last Friday's PCE data, I started the week wondering if the USD was shortable. The week started slowly with the US markets closed for independence day.

Things livened up on Wednesday evening UK time thanks to the release of the fomc minutes, which came across as hawkish and I felt it was a viable reason to take a dollar long trade. At the time I could have traded it against any of the currencies, but I chose USD CAD. I picked the CAD to short because I liked the 1hr support on the chart and there was plenty of room up to resistsance. Also the CAD had recently reported mildy disappointing data.

On Thursday the dollar strength continued and was given an extra boost by ADP and ISM data, which I felt created another viable USD long opportunity, this time I chose NZD USD. I chose the NZD simply because at the time it was performing the worst against all the other currencies. But overnight Thursday, and in the lead up to NFP, the dollar weakened considerably, I couldn't quite out my finger on why, it may well have been pre NFP profit taking.

The NFP numbers were a little mixed but by and large showing the US economy is still resilient. But the headline number was softer than expected, and even though the wage growth headline number was up at 4%, the unrounded number was 3.58%, so not quite as good as the headline suggests. The US 2year bond yield dropped first followed by the US 10year, taking the USD with them.

I felt the dollar weakness was too strong to ignore and a 1:1 Friday afternoon USD short was a viable trade. I could have chosen anything to short the dollar against. Rather unusually I chose the JPY, simply due to the correlation with yields and the chart had the most momentum.

Which brings me full circle and I'm once again starting the week thinking short dollar trades could be an option. At least into the CPI release on Wednesday.

Results for the week:

Trade 1: USD CAD +1.5

Trade 2: NZD USD -1

Trade 3: USD JPY +1

Total = +1.5