A perennial problem of the dollar and profit-taking trading

27 sept 2019

The US dollar continues to demonstrate the resistance. It does not decrease after the Fed cuts, it ignores macroeconomic statistics, it grows amid a political scandal and a possible impeachment of Trump. The US dollar as the main asset-refuge, the growth of the dollar is a consequence of the weakness of other currencies, etc.). But why? Obviously, with time the stock of negativity will accumulate. That is why we continue to recommend the dollar sale in the foreign exchange market. We are sure that all this is compensated by a large movement, which ultimately cannot be avoided.

As for yesterday, we note that our expectations regarding the data on US GDP for the second quarter were fully fulfilled (they came out within the forecast of 2%). The bears failed to seize the initiative. We also note yesterday's US trade balance data, which showed a deficit of $ 72.8 billion. This is a lot. Yes, while the markets are trying not to see that, but once again we note that sooner or later the US debt will be remembered both by the giant US debt (soon it will be $ 23 trillion), and the constant budget deficit (already exceeded a trillion) and the trade deficit (year on year) striving for a trillion) and so on.

In the meantime, the main attention of the markets is focused on what is happening in the repo market. The Fed continues to flood the market with money. Injection volumes have already reached $ 100 billion per day (before that it was about $ 75 billion). Against this background, the growth of the dollar seems even more abnormal.

Friday in terms of macroeconomic statistics will be relatively calm. Considering that several assets showed good growth over the week, Friday could well be a day of profit-taking, because it will be the end of the month.

In this light, our recommendations for today are as follows: buy gold, sell the dollar, buy the pound and the euro, also, today you can try to buy oil. Do not forget to put hard stops in open positions.