Dollar Hits Wall at 17-Month High, Set for Worst Day Since July
Comment of the Day

November 01 2018

Commentary by Eoin Treacy

Dollar Hits Wall at 17-Month High, Set for Worst Day Since July

This article by Sydney Maki for Bloomberg may be of interest to subscribers. Here is a section:

“We’re thinking more broadly that this is another peak in the dollar, and we’re going to see it drifting lower in the next year,” Mark McCormick, head of North America FX strategy at TD, said in an interview. “The market has priced in an excessive amount of global stress.”

The S&P 500’s nearly 7 percent drop in October likely fueled rebalancing flows back into U.S. stocks, which are now reversing, McCormick said.

But yuan strength is also a factor, he said, after China’s leadership signaled more stimulus measures are being planned to shield the economy from repercussions of U.S. trade protectionism. And Brexit developments may lift the euro and the pound, which are undervalued relative to their cyclical drivers, TD says. The dollar, meanwhile, is more than 3 percent rich to the bank’s global factor model.

Eoin Treacy's view

The Euro found support today in the region of its August low and posted its largest rebound in months to check near-term supply dominance. However, a sustained move above $1.18 will be required to question the medium-term downward bias.

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