Aug 22nd 2016: Dollar Extends Rally

• This morning, the US dollar is extending overnight gains, following comments from two different Fed members. On Friday, San Francisco Fed President John Williams said that a rate hike in September could be “in play”. Then late Sunday, Fed Vice Chairman Stanley Fischer gave a generally upbeat assessment of the US economy. The US dollar index has jumped higher, putting pressure most other dollar pairs.

• The GBP/ USD and EUR/ USD have gapped lower at the open as a result of this pressure.

• Meanwhile, the Australian and New Newzealand dollars continue to peel back from the highs.

• Elsewhere, the USD/ JPY is rebounding.

• The USD/ CAD has been the biggest winner since Thursdays as the oil heavy Canadian dollar experiences the biggest reversals.

• The only economic item of note today is Canadian wholesale sales at 13.30.

Trade Idea: 

• The USD/ JPY has been pushing higher, as the US dollar gains renewed interest. The pair is experiencing competing forces of safe haven yen demand and dollar interest rate demand.

• A short term reversal before September could well be on the cards and a good way to play this is a LOWER trade predicting that the USD/ JPY will close below 100.50 in 9 days for a potential return of 132%.

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