Dollar Dam Breaks

US dollar technical support levels crumbled Wednesday in a rout on the dollar that's been building for weeks. The pound was the top performer while the US dollar lagged. New Zealand CPI missed estimates early in Asia-Pacific trade. A new USD trade has been posted to subscribers. Below is the Premium video, highlighting the reasons behind the trade and positioning ahead of Thursday's ECB press conference.

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It's gone from bad to worse for USD as the combination of talk from Mnuchin, worries about trade and better prospects elsewhere undermine the currency. The dollar lost more than a full cent against the euro, yen and pound Wednesday. Gold soared to its highest level since summer 2016.

USD/JPY fell to the lowest since September; EUR/USD rose to the best level in three years and the pound climbed 250 pips to the highest since the Brexit vote.

Along with that, commodities priced in US dollar soared with gold and oil hitting multi-year highs.

The trigger was a comment from Mnuchin. As Ashraf pointed out, it was something he had said before, but at the moment every USD-negative tidbit is amplified and the momentum is running away.

Quietly, US economic data has softened as well. Yesterday, the Richmond Fed manufacturing index slipped to 14 compared to 19 expected in January. Today FHFA house price data and existing home sales were both on the soft side.

The big question for central bankers this year will be inflation and Q4 data from New Zealand raised some questions. Prices rose just 1.6% y/y compared to 1.9% expected. The kiwi fell a full cent to 0.7335 on the headlines. Moves in commodity and FX prices will further cloud the global inflation picture.

One person who will desperately try to restrain his currency in the day ahead is Draghi but he faces a tough task. Any hint of less-dovish policy will send the euro skyward.