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Bucking the Greenback

Dollar index's move above US$1.005 is an important breakout from 22 months of sideways trading.

PSYCHOLOGY FACTOR: The FX market includes many participants who do not want to be in the market. When their customers buy goods from the US, the banks' preferred trading position on the US dollar - long or short - is deferred as they are forced to take the opposite side of the currency trade to settle these transactions.

ROGUE BEHAVIOUR: Post-2008, the US dollar was effectively manipulated using monetary policy to trade for six years between US$0.72 and US$0.85.

US PRESIDENT-elect Donald Trump paints himself as an independent rogue throwing out the established political order. His policies hark back to Theodore Roosevelts' New Deal which built what is the now crumbling Interstate Freeway infrastructure and to Ronald Reagan's years of tax cut-fuelled...

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