Currency traders bought the US dollar after Trump confirmed that he would impose a 25% tariff on Canada and Mexico next week and raised the possibility of imposing new tariffs on China.
The tested strategy led the Bloomberg Dollar Index to its biggest gain in three weeks. Currencies linked to Trump’s targets – the Mexican peso, the Canadian dollar and the Chinese offshore yuan – all declined after the US president’s speech.
Kyle Chapman, a foreign exchange market analyst at Ballinger Group in London, said: “People say the market is tired of every tariff measure, but that’s not the case today.”
At the close of the New York trading session, the Canadian dollar fell by approximately 0.7% against the US dollar, the peso dropped by about 0.3%, and the Chinese yuan declined by roughly 0.4% against the US dollar.
Since the Republican campaign, buying the US dollar has been the cornerstone of the so-called “Trump trade”, and it has gained momentum rapidly after Trump’s election in November. Investors believe that measures such as tariffs, tax cuts and deregulation may boost US inflation and support bond yields.
Monex foreign exchange trader Helen Given said: “If these tariffs do come into effect, we could see the Bloomberg Dollar Spot Index rise further, but it must be noted that these tariffs may not be permanent. While volatility is inevitable, a sustained strengthening of the dollar is not certain.”
Marco Oviedo, a strategist at XP Investimentos, said: “The entire idea is merely seen as a tool to reach agreements on other issues.”
However, other sentiment indicators in the derivatives market suggest that traders are hedging against sharp declines in the currencies of the economies targeted by Trump’s trade policies.
Over the past few months, the bid price for call options (betting on the appreciation of the USD/CAD) has consistently been higher than that for put options (betting on the depreciation of the USD/CAD). In recent days, the risk reversal rate for the USD/CAD (the premium of call options over put options) has also risen significantly.
Technical analysis:
Gold: The strategy of buying at a low price is suitable for gold for most of the time at this stage, but there may be a deviation in the market after the late night of Friday. Therefore, we can try a short position on gold this evening. If there is a chance of a bearish engulfing pattern breaking down in the 2860/70 area, we can consider 1-2 times, especially after the release of the PCE data in the evening. For detailed positions, please consult the plugin.
(15-minute Gold Chart)
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Nasdaq: Yesterday, the operation prices we reminded you of had one success and one failure. The blue momentum area failed to support the pullback, but the yellow area refreshing liquidity completed a rebound. Today’s price performance depends on the PCE data result in the evening. If the data drops, the price may rise; if the data goes up, then try to look for short selling opportunities. For detailed positions, please consult the plugin.
(15-minute Nasdaq Index chart)
If you want to experience the same plugin as shown in the chart, please contact V: Hana-fgfg.
Crude oil: Yesterday, after breaking through the key resistance level of 69.18, the price began a long bullish trend, rising above 70.50. Today, we will continue to monitor the pullback to the nearby demand zone and try to catch the buy limit opportunity. For detailed positions, please consult the plugin.
(Crude Oil 15-Minute Chart)
If you want to experience the same plug-in as shown in the picture, please contact V: Hana-fgfg.
Today’s key economic data and events to watch:
16:55 Germany’s seasonally adjusted unemployment rate for February (official)
21:00 Germany’s preliminary harmonized consumer price index for February
21:30 Canadian GDP for December
21:30 US Core Personal Consumption Expenditures Price Index for January
