Indices up, but dollar strength remain weak as Trump’s infrastructure plan disappoints

The US equities market fared better today on a fresh new week open. The much anticipated Trump’s infrastructure investment plan is out and there is much to be disappointed about.

In summary:

  • Trump states, “We will build gleaming new roads, bridges, highways, railways, and waterways all across our land. And we will do it with American heart, and American hands, and American grit.”
  • $200 billion in funds have been allocated to persuade states, cities, and private enterprises to rebuild key infrastructure (e.g. dams, roads, airports, etc.)
  • However, American Society of Civil Engineers estimated that $2 trillion would actually be needed to make any headway for the repairs
  • ASCE estimates failure to act would cost $4 trillion in 2025 to make infrastructure repairs

The effects of this infrastructure announcement was pretty minimal. US dollar pairs failed to generate any bullish momentum for the most part. The US dollar actually sold off against both the euro and Australia dollar.

I am currently in a few trades. As part of my long term horizon, NZDCAD continues to remain in the spotlight.

NZDCADDaily
NZDCAD 1-Day

As long as this pair is sustaining above my daily support level, I do continue to maintain a bullish outlook on this pair. The Canadian economic outlook remains murky at best with recent employment figures released an 137,000 loss in part-time jobs with 59,000 from Ontario alone (source). While Bloomberg states it is too early to tell if higher minimum wage is the cause, the very public Tim Horton’s labor terms adjustment is a good indication that companies just aren’t able to absorb the higher labor costs. In the end, I simply do not foresee any upside in the Canadian dollar from a fundamentals perspective.

GBPAUDH12
GBPAUD 1-Day

From a technical perspective, this pair tested the upper bounds of the previous highs and failed to break higher. The immediate bearish candle following the price run up does signify the fact that traders have valued the 1.7877~ level as an overbought point. Originally intended just for a scalp, I am apparently holding this trade for longer than expected just given the favorable conditions. My aggressive profit target would be the lower bound of the daily range with price situated at 1.71~.

Wednesday’s US inflation figures may provide some opportunities to bet against the US dollar. Given the continued strength of the labor market, poorer than expected inflation will be more probable to negative impact the dollar versus a positive figure.

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