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Dollar Breaks Out to The Downside


The trend is your friend buy a setback off today’s US scheduled data and hope for a preholiday euphoria rally over the coming two trading sessions. While the action in the NASDAQ early today is not overly impressive, the market did breakout up and post a 12-day high overnight. As indicated already we think the NASDAQ could catch another round of short-term speculative buying as traders attempt to benefit from an ongoing preference for online shopping and from the kickoff of the holiday shopping season. Certainly, the stay-at-home stocks remain in vogue because of the calls for restricted holiday activity.


After a lack of definitive direction yesterday, the dollar index has broken out to the downside early and it-would-appear that further slow and measured declines are ahead. Certainly, the dollar could catch a slight lift if several US scheduled data points today are discouraging, but the big picture appears to set the stage for a “downtrend”. We suggest traders sell rallies in the December dollar back to 92.55, expecting the market to fall below 2020 low pricing of 91.75 in the weeks ahead.


While the trend in the bond and note markets has shifted down again, we suspect the rate of declines will be measured as significant uncertainty from the economic front remains in place as it is unclear if the US economy will hold together long enough for infections to plateau or for vaccines to provide something tangible beyond “hope”. The trade does expect to see both claims readings decline but remember last week’s surprise disappointment from an uptick in initial claims. It is possible that activity will begin to thin in the afternoon trade but the prevailing bias in bonds and notes should remain down even though the market has drafted some fleeting support from the announcement of a Treasury Secretary “deficit Dove” to the incoming administration. We would continue to be a seller of rallies up to 173-21 in December bonds and up at 138-16 in December notes.

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