The Dollar Swings on Trump Tariff News—What’s Next?
Yesterday’s Market Movements and Background
- Trump Tariff News: Reports of limited tariff implementation caused a sharp drop in the dollar. However, following Trump’s denial, dollar buying resumed.
- This highlights how sensitive the market remains to Trump’s policies.
- USD/JPY:
- The divergence in Japan-U.S. monetary policy stances and the underlying strength in the stock market are supporting USD/JPY.
- Short-term volatility is subdued, with one-week implied volatility hovering around 9.8%.
- Dollar Straight Pairs (EUR/USD, GBP/USD, etc.):
- Ongoing adjustment from previous dollar strength.
- President Trump’s inauguration on January 20 may be the next key event if he makes policy-related statements.
Today’s Key Indicators and Forecasts
- Switzerland: CPI (December)
- Limited market impact expected.
- Eurozone: Flash HICP (December)
- YoY forecast: +2.4% (previous: +2.2%).
- Core YoY forecast: +2.7% (previous: +2.7%).
- Progress toward the 2% target remains in focus.
- U.S. Indicators
- JOLTS Job Openings (November): Forecast 7.74 million (previous 7.744 million).
- ISM Non-Manufacturing PMI (December): Forecast 53.5 (previous 52.1).
- ISM Non-Manufacturing figures could significantly influence the dollar in the short term.
- Canada
- International Merchandise Trade (November)
- Ivey PMI (December)
Today’s Strategy and Key Points
- Post-24:00 (Midnight) ISM Non-Manufacturing Release
- The direction of the dollar will hinge on U.S. economic data.
- Scenario 1: If data exceed forecasts, dollar buying could intensify, lifting USD/JPY.
- Scenario 2: If data fall short, dollar selling may increase, pushing USD/JPY lower.
- USD/JPY
- Support: Around 156.80.
- Upside Target: Could aim above 157.50 if buying accelerates.
- EUR/USD
- Watch the Eurozone inflation data for either continued weakness or a potential rebound.
- Bitcoin
- Relatively less influenced by dollar movements; maintain a bullish stance.
Summary
- ISM Non-Manufacturing PMI (24:00) is today’s main highlight. Adjust trading strategies after the release based on the market’s reaction.
- USD/JPY remains underpinned, but caution is advised in determining direction.
- Given the current adjustment phase, timing entries carefully is crucial.
P.S.
Trump’s remarks on tariffs and upcoming economic indicators can trigger significant market moves. Practice sound risk management and keep a close eye on market developments!
