EUR 22.62 For Business Accounts Only

The Weekly Track champions

- The Weekly Track – Champions by Bob Savage
http://track.com/articles/the-weekly-track-champions/

There is a lesson for all of us in great come-backs. The 51st Super Bowl did that clearly with the path to victory for the New England Patriots mattering just as much as the title for American Football. The team came from 21-0 deficit to win in overtime with a 34-28 final. So too, markets watch the path of the US dollar and wonder if there will be a similar comeback. The failure in January was seen as an unwinding of overbought positions, a buy-the-rumor-sell-the-fact trade but not a reversal. But when a market ignores good news and sells this begets anxiety against the underlying trend. The USD last week ignored a general tightening of its spread against the German Bund, ignored better equity flows, ignored better growth stories – see ISM and jobs data. But it listened to the jawboning of the Trump Administration – particularly that of Peter Navarro, the head of the National Trade Council, who said Germany is using a “grossly undervalued” EUR to gain advantag
e. The comparisons to the 1929 and Smoot-Hawley Act that led in part to the Great Depression return. Explaining all capital flows in terms of global trade doesn’t quite cover the story for last week, which also had explosive gains in emerging markets, Mexico included, leaving the blame for the USD solely on Trump a mistake. Rather, the FOMC and its lack of enthusiasm for embracing a March rate hike should also share some responsibility. Their lack of clear signals puts the focus on their speeches into March again and it also puts the independence of the FOMC at risk as the Congress seems bent on further reigning in the central bank post the Great Recession. This was a week for the record books and one that left winners and losers, but how they won or lost matters for the weeks and months ahead because they guide the factors that are most vulnerable to a greater comeback – like the USD with rates or politics potentially turning. The burden for the USD rally is shiftin
g from home to abroad with the central bankers and politicians in Europe on the field. This makes the 99.45 level in the US dollar index that much more interesting as it’s the 50% retracement from 95.05 to 103.82, the September to January rally, with 98.22 the last key Fibonacci support in the uptrend.