The dollar index was sharply down in early US trading on Monday (losing 1% so far) in immediate reaction on media report, saying that new US President will stop short on imposing new tariffs on his first day.
Tariffs were among other measures on Trump’s list to be executed as soon as he officially becomes the President and current decision could be seen rather as a temporary delay, which brought a dash of optimism, than any other scenario.
Trump’s administration has an investigation of trade issues (deficits and unfair trade practices) as a top priority and tariffs are likely to be used in a carrot and stick scenario, until target is reached.
The US economy faces strong gap in trade exchange with the Eurozone and sees China as a major threat, though Trump may react differently this time and try to achieve the goals more diplomatic way.
Daily studies are weaker, as the latest pullback broke some technical supports and completed Head and Shoulders pattern on daily chart.
Bears pressure support at 108.00 (daily Kijun-sen) and eye next pivot at 107.60 (Fibo 23.6% of 99.84/110.00 rally / former higher base), violation of which to validate bearish signal and open way for deeper pullback towards 106.12 (top of rising daily Ichimoku cloud / Fibo 38.2%).
On the other hand, larger bulls remain in play and current easing could be seen as a healthy correction, preceding fresh push higher.
The notion is supported by expectations that Trump won’t move significantly away from his initial (dollar supportive) plan but would rather be more flexible in some situations.
Res: 108.40; 109.00; 109.25; 110.00
Sup: 107.60; 106.97; 106.70; 106.12
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