By Abdul H. Jaffar The seasons might change with an utmost certainty, but not the markets. At this point in time, as we wait for the US elections, investors are rebalancing their portfolio to prepare if there will be a “blue sweep”, which means a higher tax rate, a lower investment rate of return and a lower Dollar. Prior to that, all this talk about a stimulus before the election is probably just elusive and it is just “a talk”.
There is no doubt that Dollar is structurally weaker by the day. All that QEs since 2008 and now more Dollars in supply than ever, one way or another, it is going to show somewhere. The only difference now, is that we have more instruments to hide the Dollar weakness than just the traditional Euros.
Recent CFTC reports continue to reflect USD short-covering, mainly through the Euro. If stimulus talks fail to materialize, then most likely there will be squeeze on the Dollar and the first usual casualties will be the commodity currencies.
Trade Plan
Short AUD/USD below 0.7250 targeting 0.7020 and 0.6880 in 21 days.
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RTC Team