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5 Reasons Why Traders Are Selling U.S. Dollars

By Kathy LienForexJul 18, 2019 01:39PM ET
www.investing.com/analysis/5-reasons-why-traders-are-selling-us-dollars-200441542
5 Reasons Why Traders Are Selling U.S. Dollars
By Kathy Lien   |  Jul 18, 2019 01:39PM ET
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Kathy Lien, Managing Director Of FX Strategy For BK Asset Management

Daily FX Market Roundup July 18, 2019

Investors are selling U.S. dollars and we’d like to explain why. All of the major currencies traded higher against the greenback on Thursday with the exception of the Canadian dollar. There are no fewer than 5 reasons for the greenback’s weakness over the last 24 hours:

5 Reasons Traders Are Selling USD

  1. Federal Reserve poised to cut rates this month
  2. Iran seized a foreign tanker
  3. U.S. Treasury Secretary Mnuchin teases possible change in dollar policy
  4. Earnings disappointments drive stocks lower
  5. USD/JPY closes in on 1-month lows

The backdrop should be one of U.S. dollar weakness because the Federal Reserve is poised to lower interest rates this month. Although they may only grant us one rate cut in 2019, the mere fact that they are easing at all after raising interest rates in December marks a significant shift in monetary policy and the outlook for the economy. Investors are also worried about tensions in the Middle East after Iran seized a foreign oil tanker. If you recall, the U.S. was close to striking Iran in June after an American drone was shot down over the Strait of Hormuz. Treasury Secretary Mnuchin teased the possibility of a change in dollar policy Thursday morning. He said there was no change in the country’s currency policy “for now,” which suggests that they could alter the government’s support for a strong dollar in the future as another way to tip the trade scales in the country’s favor. Earnings season is also in full swing and the results have been mediocre. Stocks are down 4 days in a row and it's taking a toll on USD/JPY. Japan’s trade surplus didn’t help and leaves USD/JPY trading near its monthly low. Looking ahead, we expect further losses with a possible test of June lows near 106.78.

The British pound and Australian dollar were the best performers. UK retail sales completely blew expectations, rising 1% in June against a forecast for -0.3% decline. Spending excluding auto fuel was also very strong, which means that underlying demand is robust. This increase sufficiently covered the declines in April and May and will ease concerns about the impact of lower business investment. Sterling traders were also encouraged by reports that the European Union may be open to an alternative backstop, which has been a pressure point for the two leading candidates for UK Prime Minister.

The Australian dollar was driven higher after the most recent labor-market numbers. Although a mere 0.5K jobs were created in June, the miss was due entirely to part time work. Full-time jobs increased 21K, a solid rise that left the unemployment rate unchanged at 5.2%. The data could have been worse according to the PMIs, so investors were relieved. AUD/USD is hovering just under 3-month highs and could break higher in the coming days.

Last but not least, the Canadian dollar failed to participate in Thursday’s rally because oil prices fell for the sixth day in a row. The price of crude tumbled toward $55 a barrel, its lowest level in nearly a month. Canadian retail sales are due for release Friday and investors are worried that given the Bank of Canada’s dovishness, we could see softer spending numbers. If the data is weak, it could finally mark a bottom for USD/CAD.

5 Reasons Why Traders Are Selling U.S. Dollars
 

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5 Reasons Why Traders Are Selling U.S. Dollars

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Emanuel Cian
Emanuel Cian Jul 25, 2019 8:35AM ET
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And now the moment of truth a few days after the article. USD is even stronger. The article should have been about why traders are BUYING USD
MUKHTAR HASSAN FAGGE
MUKHTAR HASSAN FAGGE Jul 21, 2019 12:51PM ET
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Good reasons.
Deddy Herdian
Deddy Herdian Jul 21, 2019 11:10AM ET
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I think you’re one of the best analyst in the world right now
Bonifacio sechico
Bonifacio sechico Jul 20, 2019 11:53AM ET
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Thanks maam GREAT ANALYSIS
Daniel Tumusiime
Daniel Tumusiime Jul 20, 2019 4:40AM ET
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Great analysis thanks
Wiafe Gaddafi
Wiafe Gaddafi Jul 19, 2019 10:23PM ET
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You're The Best
Mariel Lang
Mariel Lang Jul 19, 2019 12:52PM ET
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Thanks!
Saifullah Sumon
Saifullah Sumon Jul 19, 2019 7:07AM ET
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Good and informative TQ
Md Uzzaman Acma
Md Uzzaman Acma Jul 18, 2019 11:26PM ET
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what is next position of USD
Mariel Lang
Mariel Lang Jul 18, 2019 11:26PM ET
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Checkout gold, maybe when it starts falling, usd will go up again
Jul 18, 2019 11:26PM ET
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right...
Ellon Lon
Ellon Lon Jul 18, 2019 9:59PM ET
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thank you
ADAM AND EVA
ADAMANDEVA Jul 18, 2019 8:14PM ET
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Wonderful short positions are open !!!
Chris Poulos
Chris Poulos Jul 18, 2019 7:20PM ET
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this is a couple of months away but everyone should take note ....  the US is set to hit the debt limit in october. this means that congress will need to vote to increase the debt ceiling. if they dont the US is out of cash and the government will begin to shut down. this could be a huge problem ....  or not depending on congress. the huge crash in usd/chf in 2011 that took the usd all the way down to 70 cents was a direct result of this same scenario. if congress is obstinate and decides to use this for political leverage the US dollar could crash.
Тихон Григорьев
Тихон Григорьев Jul 18, 2019 6:48PM ET
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>Iran seized a foreign tanker.Is this why Brent was destroyed today?
Emanuel Cian
Emanuel Cian Jul 18, 2019 6:45PM ET
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Quickly taking advantage of a temporary USD weakness
Timmy Satyana
Timmy Satyana Jul 18, 2019 5:46PM ET
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GBPUSD potential make double bottom, if it break 1.25820 then i will go buy with the target 1.26680..
HelliumStar ..
HelliumStar .. Jul 18, 2019 5:09PM ET
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US ship destroyed Iranian dron in Strait of Hormuz.. EUR$USD bulish signal...
liakat ali
liakat ali Jul 18, 2019 4:04PM ET
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What is expected now,is usd will be strong tomorrow also or it will come back to tilt again?. Gbp/usd trading near resistance now in 1.2560. Is it may come again in downtrend?. What's your opinion please.
jim boblooch
jim boblooch Jul 18, 2019 4:02PM ET
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thanks
Solomon Lalani
Solomon Jul 18, 2019 3:53PM ET
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You didn't mention the most important reason: Russia agreed to join Europe's plan to bypass SWIFT! This alone is the most important factor. If China also joins, RIP USD!
Trader Steve
Trader Steve Jul 18, 2019 3:45PM ET
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#6 - US shot down an Iranian drone.
 
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