Well, it’s happening. And it’s not the first time it’s happened, either, so it’s not like it’s the end of the world. In case you’ve been skimping on your Daily Recommended Allowance of news, what I’m talking about is that the United States Congress, never a bastion of common sense, managed to end the week without approving the necessary legislation that would allow the government to continue operating while a budget is approved.
In a nutshell, this means that as of right now, many government employees will be on mandatory furlough, some government offices and functions will cease operating, others will at the minimum levels required to make sure the Zombie Apocalypse doesn’t ensue, the uninformed will be all panicky, and the rest of us will be shrugging our shoulders and not giving a damn.
But we’re traders, right? So the real question is, how will the markets react on Sunday evening when they open, and what can you do about it? We’re not into prophecies here, but let’s do some critical thinking. This is going to behave like an unannounced fundamental, and it’s not going to be pretty for the US dollar. I am going to go out on a limb and state that if there is no counterbalancing news before Sunday’s open, we’ll see a weakening of the dollar that will continue into next week. It will continue until the market stabilizes, or more likely, until Congress finally strikes a deal and gets the show back on the road. So sell the dollar going into the new week.
So there you have it. If you had open trades that were relying on dollar strength, then there’s nothing much you can do. You are going to be penalized on Sunday’s open. If, on the other hand, you were playing dollar weakness, as modesty aside, I am, and have open trades accordingly, then you may end up with a bit of a bonus. Was I incredibly smart in holding dollar weakness trades open through the weekend? No. Not really. I just paid attention to the news.
The government shutdown has been a distinct possibility since last year, and it all came to a head this week. And it was all there in the news, every single day. Chances of a deal being struck were slim indeed. The Democrats were insisting on a DACA concession from the GOP, and Trump isn’t one to back down. So it was there, plain to see.
Did you see it?
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