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Hardy: The only trade right now is to be long USD

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There seems to be no stopping the dollar as it goes from strength to strength. On Monday morning it rose to a near two-year high against the euro and a six-year high against the yen. Saxo’s John Hardy says “the only trade right now is to be long dollar” although he adds caution to how long the upside will last. He says all eyes are on Thursday’s ECB meeting and Friday’s US jobs data.

Hardy says the background to the dollar’s strength is that the Federal Reserve is withdrawing from stimulus policy while the ECB and the Bank of Japan are embracing it. He also says the US economy looks strong compared to the rest of the globe. He says the market is now waking up to the withdrawal of dollar liquidity.

Hardy expects the ECB meeting to be a “short-term pivot point” for Eurodollar and that consolidation will follow.  He says it’s unclear what President Draghi will announce but that he expects more dovish surprises. On the non-farm payrolls Hardy believes the Fed is completely focused on Friday’s data and only then will it reveal its next move. He says that US macro data and employment report will also be key to whether or not USDJPY can move above the 110 level.