Originally published by AxiTrader
The US dollar came under intense selling pressure against the euro, yen, and Swiss franc over the past couple of days as the maelstrom around the US President and questions about Russia ties intensified.
By now readers are aware that president Trump shared information with Russia at last week's White House meeting and that various news outlets claim to have the details - but not sighted - memos written by former FBI director James Comey alleging the president leant on him to close the investigation in former NSA Michael Flynn.
And traders in stock, bond, gold, and forex markets have reacted to the implication that this could be an obstruction of justice - and thus derail the Trump presidency and its tax and infrastructure plans - by getting out of their Trumponomics trades.
As a result the US dollar has collapsed this week and in US Dollar Index (DXY) we have seen a break of the uptrend which stretches back to the start of the dollars climb in 2014.
What's important about this is that even though the DXY is a pretty narrow measure of US dollar strength and weakness - dominated by the euro - it does tend to correlate well in a directional sense with a vast swathe of global forex.
So this breach of a 3 year trendline is an important sea-change for forex markets.
On a purely technical sense, the DXY is biased back toward one of my garden variety 38.2% retracement. That level - the 61.8% of the move from 2014/2016 on the chart above - comes in at 94.40.
That suggests there is possibly another 3% down move looming for the US dollar before it evens gets near a decent level of support.
With the maelstrom around president Trump unlikely to be resolved quickly and with the data flow in the US printing much weaker than expected, not to mention other nations, and with the potential for traders to wonder if the fed might be derailed to the widely anticipated June rate hike further weakness in the US dollar looks likely.
But even though the US dollar moves correlate well across the board I'd expect the yen, euro, swissie, and gold to lead the pack while "risk" currencies like the Aussie dollar and EM lag.
Have a great day's trading.