Heading into April, markets were fearing armageddon but instead we got treated to the first round of TACO trades. But by now, we've adjusted to the reality that Trump loves to talk up a big game before pulling back, then calling whatever terms that were watered down to be "the best deal ever".
In the case of the dollar, we've seen shorts pile in over the last few months and it is now really crowded. A short squeeze can't be ruled out but what about a larger correction? If the script has flipped, then there will be some pain to be had if markets have gone too far in pricing in TACO at every stage.
So, the question is what happens now as Trump looks to push forward with more tariffs on 1 August?
For now, the threat of that is keeping broader markets on edge with the dollar finding some support with most of the downside already priced in. I would say most of the tariffs that will be put into effect are priced in by now but still, that only means that we might have hit the wall in terms of gauging the pain threshold for the dollar.
Meanwhile, EUR/USD is down just under 1.1700 while USD/CAD jumped up earlier to above 1.3700 after Trump announced 35% tariffs on Canada.
However, are we due a stronger correction in the dollar and stocks? That might be a little early to tell. But from price action this week, it is suggestive that the dollar might be looking to plant the seeds for that in the coming weeks. Just some food for thought.
This article was written by Justin Low at www.forexlive.com.Hence then, the article about dollar holds firmer ahead of european morning trade was published today ( ) and is available on forex live ( Middle East ) The editorial team at PressBee has edited and verified it, and it may have been modified, fully republished, or quoted. You can read and follow the updates of this news or article from its original source.
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