As the credibility of US institutions is under threat, the US dollar and other US assets are vulnerable to further selling.
US President Donald Trump now has the opportunity to choose the successor to Federal Reserve Governor Adrianne Curry, who resigned on Friday, which could weaken the influence of Federal Reserve Chair Jerome Powell.
Adding to this, Trump’s firing of the Bureau of Labor Statistics’ chief, Erica Groshen, last week raises the risk that investors will reduce their holdings of US assets due to concerns over the integrity of economic data and the independence of monetary policy. Such worries have already hit the dollar this year and led to some capital withdrawals from the US bond and stock markets.
“Unfortunately, we are witnessing the White House’s attempt to concentrate more and more power in its hands,” said Robert Bergqvist, senior economist at SEB AB in Stockholm. “All of this justifies the rise in risk premiums for holding various US assets.”
Concerns over the politicization of US institutions have emerged at a time when signs of an economic slowdown are becoming apparent. Despite a tentative rebound in the dollar early last week, the currency fell sharply against all G10 currencies on Friday, following a weaker-than-expected US jobs report.
Employment data has prompted traders to increase their bets on the Fed’s easing policy, with the money market pricing suggesting a greater possibility of a rate cut next month. Given that Trump has been calling for an immediate rate cut, Kugler’s vote to keep rates unchanged last week led to an increase in traders’ bets, and this trend has intensified further since Kugler’s resignation.
“The credibility of US policy-making is increasingly under threat,” Elias Hadad, a strategist at Brown Brothers Harriman in London, said. The dollar is vulnerable to further declines. He said that Trump’s pressure on Powell and his colleagues to cut interest rates “has undermined the Fed’s independence”, while the firing of McEntry “could damage perceptions of the integrity of US economic data”.
Derek Halpenny, global market research head at MUFG in London, said that among the public speculation about Powell’s successor, National Economic Council Director Kevin Hassett would be “the most unfavorable choice for the dollar because of his close relationship with the president.” Halpenny added that Treasury Secretary Scott Bessent would also be negatively evaluated by investors due to his relationship with Trump, but to a lesser extent than Hassett.
Halpern said that because of the central bank experience of former Federal Reserve governor Kevin Warsh and current governors Christopher Waller and Michelle Bowman, they will be viewed more favorably.
He said, “Before we get an official statement, interest in repurchasing the dollar will be limited after its fall on Friday.” The dollar index was almost unchanged on Monday and has dropped nearly 8% so far this year.
In any case, the nomination of the Fed chair is a risky event for the market as liquidity tends to be scarce in August and investors are on vacation. Trump said on Sunday that he plans to announce the successors of Kugler and McEntee in the coming days.
Technical analysis:
The functions of WeChat are subject to occasional restrictions. Students who want to experience the plug-in are kindly requested to try multiple times!!!
Gold: Yesterday, our plugin clearly reminded to set a buy limit order directly in the green zone. Currently, this strategy has at least made a profit of over 30 dollars, with a profit-to-loss ratio of more than 3 times. For today, we suggest to advance the base position for protection and then pay attention to the momentum breakthrough signal above 3380 for a buying attempt. For detailed positions, please consult the plugin.
The plugin is updated from 12:00 to 13:00 every trading day. If you want to experience the same plugin as shown in the picture, please contact V: Hana-fgfg and note “666” in the message.
Nasdaq: Overnight, we were hoping for a pullback after the liquidity sweep, but the price did not fall below the lower track of the yellow zone after the sweep was completed. Therefore, the sell order was not triggered. For today, we will continue to monitor for any signals of a downward break. If such a signal appears, we can consider a short position. For detailed positions, please consult the plugin.
(NASDAQ 15-minute chart)
The plugin is updated from 12:00 to 13:00 every trading day. If you want to experience the same plugin as shown in the chart, please contact V: Hana-fgfg and note “666” in the message.
Crude oil: Yesterday, we clearly reminded in the article and the plugin that a defensive attempt of 1-2 long positions should be made below 66.50. Although the price did not complete a reversal in the green buy limit area, it quickly crossed the yellow upper track after breaking below the yellow lower track, completing a breakout buy signal to sweep liquidity. This trade achieved at least a 4:1 risk-reward ratio. If the price returns above 66.50 intraday, we will consider new long positions after the momentum signal appears. For detailed positions, please consult the plugin.
(Crude oil 15-minute chart)
The plugin is updated from 12:00 to 13:00 every trading day. If you want to experience the same plugin as shown in the picture, please contact V: Hana-fgfg and note “666” in the message.
Today’s key economic data and events to focus on:
17:00 Eurozone Producer Price Index (Year-on-Year) for June
22:00 U.S. July ISM Non-Manufacturing Purchasing Managers’ Index
