Shocker: U.S. Dollar Second Worst Currency of 2017

Apparently, the buck stops with Trump.

After a 13% run from May 2016 lows, the U.S. dollar is beginning to slip, having just broken below its 50-day moving average to the downside.  At this pace, it could challenge a December 2016 low of $99.25 before long, infuriating those who are long the currency.

 

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On Tuesday, the U.S. dollar index (DXY) has moved to 100.32 by end of day, as well.  That breaks last week’s support at 100.72, which was a test of a December low of 100.73.  At this pace, the dollar could easily break below the psychologically important level of 100.

Should that break, we test 99.80, which is a 50% retracement from the January high.  The next level of support would be 99.43.  Further weakness could suggest significant, near-term reversal. 

All as President-Elect Donald Trump called the U.S. currency “too strong,” which he blames partially on China, which is holding down its currency.  “Our companies can’t compete with them now because our currency is too strong,” he noted.  “And it’s killing us.”

Trump isn’t the only one warning of the rise in currency, though.  Private equity firm, Carlyle Group said the strength of the dollar was the greatest risk to the economy, as it has the potential to hurt U.S. companies that sell products abroad by making their goods more expensive, as noted by The Wall Street Journal.

While true, such comments from Trump could still roil stocks, which have enjoyed quite an explosive run in recent months.  Typically, presidents refrain from offering direct views of the strength or weakness of currency out of fear of influencing the market.

Should the U.S. dollar find near-term support, it could preset buying opportunities for investors with U.S. data continuing to be a strong source of support. 

Meanwhile, metals are still running hot and heavy as the dollar reverses.  Gold for example was up another $16.70 on Tuesday.  Copper is challenging triple top resistance near $2.75.  Aluminum recently gapped higher, too, challenging an all-time high.

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