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Hardy: The US shutdown, the dollar and you
As the US government shutdown enters its second week, Saxo Bank’s John Hardy says that markets are nervous, but “nervous in a way that nothing is happening”. He says no one really wants to commit to a trade, and thinks this dynamic may continue until the October 17 US debt ceiling “deadline”.
As a result, the dollar is weakening against some of the major currencies, notably the yen and the Swiss franc. He says dollar yen is now below the 97 level, so he is still "watching the 96.80 level". To the upside he thinks 97.50-98 is key.
He is also looking at dollar swiss, which he says is at this "huge level" of 90 - a pivot area if this risk-off environment starts to develop.
But John adds that elsewhere, the dollar could do "quiet well" versus commodity currencies, which tend to do poorly in a risk off environment.
A few hopeful signs with regards to the budget standoff emerged on Monday, with President Barack Obama saying he would accept a short-term increase in the nation's borrowing authority to avoid a default.
China and Japan, the United States' biggest creditors, are increasingly worried the US government shutdown and standoff over the debt ceiling could wreak havoc on their trillions of dollars of investments in US Treasury bonds.
Japanese Finance Minister Taro Aso said on Tuesday that he wants the United States to resolve its debt ceiling standoff quickly to preserve his country's foreign reserves and the global economy.
Read more about john's predictions here:
http://www.tradingfloor.com/posts/fx-market-pressed-pause-button-1950978479
01:50 minutes
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