Daily Analysis: Trump Unleashes Dollar Short Squeeze

Thursday Market Recap

Asset Current Value Daily Change
S&P 500 2843 0.11%
DAX 13298 -0.85%
WTI Crude Oil 65.12 -0.42%
GOLD 1348.00 -0.61%
Bitcoin 11,200 -2.05%
EUR/USD 1.2390 -0.20%

Forex markets remained in focus today throughout the session, as the Davos meeting continued to provide bombshells, igniting spectacular moves in the major fiat currencies. The Dollar got dumped in early trading again, and the Greenback hit multi-year lows against several currencies, with the EUR/USD pair topping 1.25 for the first time since 2014, following the ECB’s rate decision and press conference.

The session ended with a late and violent reversal, which was triggered by none other than Donald Trump.The POTUS said that Treasury Secretary Mnuchin’s words were “misinterpreted” about the benefits of a weaker currency, and the Dollar will get stronger in time. While the early strength of the Euro took out all stops on the long side for the common currency, Trump pushed the most traded pair back to 1.2360, for an almost 1.5% intraday move.

EUR/USD, 5-Minute Chart

US stocks were also active and volatile, starting out with an overnight rally in the futures market that took back the main indices close to their recent all-time highs. After a series of wild swings, equities finished the day virtually unchanged, but the intraday volatility might be the sign that the relentless rally is headed for a correction.

S&P 500, 4-Hour Chart Analysis

Economic numbers continued to disappoint in the US, and so far, all major releases missed the consensus estimate this year, in stark contrast with the stellar performance of stocks. This time around, New Home Sales took a nosedive, and that could mean that rising rates are finally taking their toll on the housing market.

Commodities also had a rough ride today, with gold and crude oil both capitalizing from the Dollar weakness in early trading, hitting new multi-year highs again. Then, along with the late day trend change in the other asset classes, gold dived back below $1350, while the WTI contract plunged back to $65 per barrel after trading at $66.30 earlier on, and silver also declined significantly.

Gold, 4-Hour Chart Analysis

Cryptocurrencies

The crypto segment had another relatively quiet session, with no major moves by the majors, compared to the recent volatility at least, and with no real changes in the technical setups. Although BTC traded as high as $11,700 during the day, the value of the largest coin sank below the key $11,300 level in late trading, and the sector mostly followed the lead of Bitcoin.

BTC/USD, 4-Hour Chart Analysis

Stellar is still in the center of the attention, as the best performing large altcoin of the recent period, and more positive news fueled the rally in the coin. The coin is in a short-term uptrend, trading above the key $0.50-$0.55 zone despite the broad downtrend in the segment, and the more than 70% decline that took Stellar back to the $0.30 level during the crash. NEO and Ethereum are still among the stronger altcoins as well, while Litecoin and IOTA are still the notable laggards of the segment.

Stellar/USD, 4-Hour Chart Analysis

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Author:
Trader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.