Donald Trump had an interview with WSJ yesterday where he talked about the USD being too strong. While this is usually the job of the secretary of the National Treasury, Donald couldn’t wait to talk about how China also manipulating currency to their advantage and to the disadvantage of US workers. The USD has since lost 1% since it was published. Donald Trump inauguration will be on this Friday and while clarity is needed, more evidence has to be there to encourage or at least breathe something into investors and let them belief that fiscal stimulus and promised infrastructure spending will trigger inflation towards the 2% target. It will be also a challenge given that the FED plans to hike interest rates this year after the dot plot chart was raised while the central government plans to spend through borrowing then implement tax cuts. With these, I think the recent lower lows in this currency pair only tends to encourage and attract more value buyers into the mix and drive this pair higher. Further, think about any rise of USDJPY pair which signals more risk taking and as US Treasury yields resumes its higher highs, the USD will likely gain, as premium on long term yield rise.
To the charts now, the 4HR chart is oversold and a buy signal printed, I shall look to target 100 pips this week from the current price of 113.30. This will fall at the monthly resistance line and a likely break above resistance trend line. The monthly chart is bullish, the daily and weekly charts are bearish and this is why either trade will be mix and not 100%.It is for this reason alone that you can trade a small lot size or wait for a clear trend move in either direction. For now, my skew is pro-USD, at least until this is confirmed or nullified.
So trading will be as follows:
Take Profit: 114.30
Trailing Stop: 30 pips
Have a good trading day.