Strong Dollar Could Have Negative Short-Term Effects on the US Economy

Hit the Mark Trading’s Brief Review of Overnight Market Action Setting the Tone for the Trading Day

Market Briefing

US dollar fell strongly on comments reiterated by Treasury Secretary Mnuchin, suggesting an excessively strong dollar could have negative short term effects on the US economy. This morning, we find US dollar higher off yesterday’s lows. If dollar is higher then gold and Euro are lower in see-saw action.

UK – Expect a “soft” Brexit now that the high court in Britain said Prime Minister May must secure the approval of Parliament before she starts the process of taking the UK out of the European Union.  She already indicated a willingness to cooperate with Parliament before today’s decision.  Negotiations start end of March for Brexit. Pound lower as FT.com explains part of the court ruling said Parliament cannot veto Brexit.

Eurozone composite flash PMI comes in at 54.3 for January. The prior reading was 53.9 last month. Any reading 50 and above represents economic expansion.  Within the core, the news was slightly mixed. Thus while the composite output index in France provisionally rose to a 67-month peak of 53.8, its German equivalent dipped 0.8 points to 54.7, a 4-month low. However, business expectations in Germany hit their highest mark since January 2014. Elsewhere, the rate of growth of business activity (and employment) slowed a little but remained solid (econoday.com).

Japanese flash PMI reported 52.8 versus prior reading of 51.9.

Global economies are gathering steam.  USA flash PMI reading released today at 9:45AM ET.

Thursday is a big tech earnings event with Alphabet (Google), Microsoft, and Intel reporting. The three have a combined market value of over$1,200 billion dollars.

Beyond this, not much overnight trader news.

Economic Events

  • Redbook – 8:55 AM ET
  • PMI Manufacturing Index Flash – 9:45 AM ET
  • Existing Home Sales – 10:00 AM ET
  • Richmond Fed Manufacturing Index – 10:00 AM ET
  • 4-Week Bill Auction – 11:30 AM ET
  • 2-Yr Note Auction – 1:00 PM ET

Markets

Turn-around Tuesday begs the question are markets rigged. Let’s say, not in a negative sense anymore than everybody following the “herd” rules of the road while driving is rigged.

Here’s the rule of thumb…if markets are down on Monday, we expect they will magically “turn around” on Tuesday. Don’t take my word for it…simply check your charts and you will see I am telling you the truth. Never over-think the markets.

Equity index futures still caught in side-way channel.

Crude moves incrementally nothing special.

Natural gas higher on cold weather forecast.

Gold and Silver lower on stronger US dollar.

Corn potential reversal price bar starting after 3.70 test.

Soybeans simply dangerous…all about the weather in Argentina. Sunny days = lower USA bean prices.

Cocoa triple bottom shows traders recognize and try to lift.

Coffee, we are in this trade with options on JO and Coffee up today. Buy your buddy a cup today!  Here are my comments from last night’s client video service for this educational trade:

Coffee hits our 156.60 line, then falls back closing at 154.85. JO profits now $92.50 per position representing a 42% return on investment less your commission cost. Nice. We must see price clear our 156.60 line…mission critical!

Bonds incrementally lower could drop on strong PMI report.

All currencies lower against US dollar except Canadian dollar.

To learn more from Martin, visit HitTheMarkTrading.com to join his mailing list and receive blog updates.