From the Punter Trenches (26 Jan 2018)


By Tanya Rawat

World Economic Forum in Davos had an unexpected slate of volatility yesterday and as US Treasury Secretary Mnuchin supported the case for a weaker Dollar while European Central Bank (ECB) Governor Draghi sounded displeased with this blatant position by the US to jawbone the Dollar weaker. He maintained that the probability of rates hikes by ECB seem narrow while a stronger Euro is indeed concerning. Today US President Trump had an opposite rhetoric to that of Mnuchin and supported the case for a stronger dollar.

The Dollar see-sawed on these muddled signals coming from the US wherein it briefly touched lows of 88.7 handle while, as Euro touched 1.25 handle and JPY strengthened to 109.8 handle. Gold after touching resistance of $1365/oz is likely to see minor pullback before it continues its upward path. Good time to add on to existing positions or new ones.

All my calls apropos Dollar, Euro, Gold and Japanese came to pass this week or are coming. Key to watch will the US 10 Yr Tsy’s path from 2.65 levels. If it continues to hover around these levels and start consolidating upwards, we are likely to see stronger moves in other asset classes as I have been iterating. German 10 Yr Bunds also are very close to breaching a key monthly downward trend line viz. 0.65 levels.

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