US Dollar May Rise After Trump Meets Juncker, GDP Growth Soars

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US Dollar May Rise After Trump Meets Juncker, GDP Growth Soars


  • US Dollar erases Powell-driven gains on Trump jawboning
  • Auto tariff hike may be shelved as Junker visits White House
  • GDP surge, easing trade war fears might send USD higher

See our free guide to get help building confidence in your US Dollar trading strategy!

The US Dollar seesawed last week, touching a one-year high early in the week only to give up most of the advance by the closing bell on Friday. The early advance was driven by supportive comments from Fed Chair Jerome Powell, who stuck to a cautiously hawkish stance despite recent trade war worries in semi-annual Congressional testimony.

President Trump triggered the reversal Thursday, telling CNBC that he is “not thrilled” by Fed interest rate hikes and asserting that a stronger currency puts the US at a disadvantage. He doubled down despite widespread outrage on the following day, accusing China and the EU of manipulating their currencies and again decrying the tightening of domestic monetary policy.

This sets the stage for fireworks as trade-related issues predominate in the week ahead. G20 finance ministers and central bank governors will almost certainly give Treasury Secretary Mnuchin an earful at a gathering in Buenos Aires over the weekend. European Commission President Junker will try to mend fences in a meeting with Mr. Trump Wednesday while the WTO mulls US/China tensions at a meeting Thursday.

Background - A Brief History of Trade Wars, 1900-Present

All this precedes a turn to focus back on economic as second-quarter GDP crosses the wires Friday. The annualized growth rate is expected to surge to 4.2 percent, marking the strongest performance in close to four years. Timelier PMI data published earlier in the week will imply such momentum carried over into July if economists’ expectations prove to be broadly indicative.

Mr. Trump’s move to jawbone the greenback lower may have reflected a familiar strategy: showing strength before a negotiation in an attempt to win more favorable terms. Such bullying may have been meant to set the stage for the meeting with Mr. Juncker, where the US President might be looking to exact the highest price possible for backing down on plans of higher auto import tariffs.

US Department of Commerce hearings on the proposed duties increase revealed deep domestic opposition last week. Pushing on with such unpopular policy will probably not do Republican lawmakers any favors in the upcoming midterm election and Mr. Trump is likely to sacrifice it in any case. A media coup at the expense of Mr. Juncker that casts him as an assertive dealmaker in the process seems like the object of the game.

Robust GDP data might well offer cover for a climb-down. Highlighting displeasure with Fed tightening hardly makes sense when the economy appears to be firing on all cylinders, for which the White House is no doubt eager to take credit. On balance, this probably means that the US Dollar has scope to return to the offensive in the week ahead.


--- Written by Ilya Spivak, Sr. Currency Strategist for

To contact Ilya, use the comments section below or @IlyaSpivakon Twitter

Euro Forecast: Euro Stabilization to Continue as Attention Turns to Draghi

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Euro Forecast: Euro Stabilization to Continue as Attention Turns to Draghi

Fundamental Forecast for EUR/USD: Neutral

- The Euro has continued with its bottoming process started two weeks ago, gaining ground against all but two currencies last week.

- Economic data has started to improve more broadly alongside inflation expectations, and now traders will look to ECB President Mario Draghi’s two speeches this week for clues on monetary policy.

- The IG Client Sentiment Index suggests a neutral outlook for EUR/USD, but retail traders have started to increase their net-long positioning.

See our long-term forecasts for the Euro and other major currencies with the DailyFX Trading Guides.

The Euro was a top three performing currency last week, gaining ground against all but two of the majors. EUR/USD was the performing EUR-cross, gaining +0.53% during the holiday shortened week as the US Dollar was hampered by the official commencement of the US-China trade war. And while market participation has been low thanks to the World Cup, the upcoming slate of Eurozone economic data and events should draw more interest than what’s been seen thus far in July.

Economic data has started to improve more broadly alongside inflation expectations, and now traders will look to ECB President Mario Draghi’s two speeches this week for clues on monetary policy. The Citi Economic Surprise Index for the Eurozone, which was at a near-seven year when it was -100.1 on June 8, rebounded to -36.1 by the end of last week. The final June Eurozone Consumer Price Index due in on Thursday at +2.1% y/y will underscore the extent to which data has stabilized.

Accordingly, now that data momentum is back on the upswing with inflation running higher, it seems likely that ECB President Mario Draghi will be able to refrain from issuing a severely dovish tone during either of his policy speeches this week (Monday and Wednesday). At the June ECB rate decision, Draghi said that it was possible that a rate hike came as soon as “summer 2019,” and it’s possible he offers more color to that point. Rates markets are currently pricing in September 2019 for when the ECB will first move on rates.

Otherwise, the economic calendar contains few other significant opportunities for traders to be left with a lasting impression for price action. The July Eurozone and German ZEW Surveys on Tuesday will generate limited interest, as will the comments made by ECB policymakers Lautenschlaeger, Praet, and Mersch between Tuesday and Wednesday.

Beyond the data, traders will be paying particular attention to developments in the United States multi-front trade war. Now that a front had opened up with China, traders will be quick to react to any signs that Europe will be sucked in deeper as well. But the simple reality of the US being at the center of a disruption to the global trading system leaves the US Dollar at a disadvantage, giving another reason for EUR/USD to stabilize further in the near-term.

Finally, positioning is a non-factor at the start of Q3’18, a complete 180 degree turn from where positioning stood at the start of Q2’18. With the US holiday mid-week, the CFTC has yet to release the positioning figures for the week ended July 3 (due out on Monday, July 9). Per the most recent report for the week ended June 26, speculators held +33.9K net-long Euro contracts, a -78% decline from the all-time high set during the week ended April 17 (+151.5K contracts). Positioning still isn’t a significant factor for the Euro.


Whether you are a new or experienced trader, DailyFX has multiple resources available to help you: an indicator for monitoring trader sentiment; quarterly trading forecasts; analytical and educational webinars held daily; trading guides to help you improve trading performance, and even one for those who are new to FX trading.

--- Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher, email him at

Follow him in the DailyFX Real Time News feed and Twitter at @CVecchioFX.

USD/JPY Clings to Bullish Trend Ahead of U.S. 2Q GDP Report

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USD/JPY Clings to Bullish Trend Ahead of U.S. 2Q GDP Report

Fundamental Forecast for Japanese Yen: Bearish

Japanese Yen Talking Points:

USD/JPY is under pressure following the semi-annual Humphrey-Hawkins testimony as President Donald Trumpwarns that a strong dollar is ‘taking away’ the competitive advantage of the U.S. economy, but the Federal Reserve’s hiking-cycle may continue to foster a long-term bullish outlook for the exchange rate as the central bank appears to be on course to implement higher borrowing-costs over the coming months.

Recent price action in USD/JPY raises the risk for a larger correction as the advance from earlier this month fails to produce a test of the December-high (113.75), and the U.S. president’s criticism surrounding the Federal Reserve’s policy may continue to dampen the appeal of the greenback as it undermines the central bank’s ability to independently carry out its dual mandate to foster full-employment and price stability.

With that said, fresh data prints coming out of the U.S. may keep the Federal Open Market Committee (FOMC) on course to further normalize monetary policy as updates to the Gross Domestic Product (GDP) report are anticipated to show the economy expanding 4.2% in the second quarter versus the 2.0% rate of growth for first three-months of 2018. Signs of a more robust economy may spark a bullish reaction in the greenback as it encourages the FOMC to deliver four rate-hikes in 2018, but a marked slowdown in the core Personal Consumption Expenditure, the Fed’s preferred gauge for inflation, may generate a mixed reaction as it curbs bets for an extended Fed hiking-cycle.

Keep in mind, the broader outlook for USD/JPY remains constructive for now as both price and the Relative Strength Index (RSI) preserve the bullish formations from earlier this year, but the reaction to the slew of tweets from President Trump raises the risk for a larger pullback as the exchange rate initiates a fresh series of lower highs & lows, while the momentum indicator finally falls back from overbought territory and approaches trendline support.

USD/JPY Daily Chart

USD/JPY Clings to Bullish Trend Ahead of U.S. 2Q GDP Report

USD/JPY falls back towards the former-resistance zone around 111.10 (61.8% expansion) to 111.60 (38.2% retracement) after failing to test the December-high (113.75), and a break/close below the state region may open up the downside targets if price and the RSI snap the upward trends from earlier this year. A break of trendline support may spur a move back towards the July-low (110.28) as it highlight a bearish signal, with the next downside region of interest coming in around 109.40 (50% retracement) to 110.00 (78.6% expansion).

For more in-depth analysis, check out the Q3 Forecast for Japanese Yen

Additional Trading Resources

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--- Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.

GBP: Holiday Lull Ahead But Brexit May Break The Calm

Fundamental analysis and financial markets.

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GBP: Holiday Lull Ahead But Brexit May Break The Calm

Sterling (GBP) Talking Points:

  • UK Parliamentary recess starts next Wednesday for six weeks.
  • Leadership challenge may still occur in the next four days.
  • UK data calendar empty next week.

The DailyFX Q3 GBP Forecast is available to download.

Fundamental Forecast for GBP: Neutral

We remain neutral on GBP at current levels, mainly due to the currency’s recent heavy falls, but note that even though the UK Parliament is due to break for holiday, starting on Wednesday July 25, that a leadership challenge before the recess remains a possibility. To trigger a vote of no confidence in UK PM Theresa May, the Conservative Party’s 1922 Committee must receive 48 letters of no confidence from MPs. According to recent reports the Committee have already received a large number of votes, with one MP, Andrew Bridgen, saying that Brexit rebels are close to the required number of votes, although any leadership would probably take place after the recess.

Sterling is nearing important levels against both the US Dollar and the Euro and traders will need to remain attentive of any Brexit news next week, especially as the UK data calendar is empty. The British Pound could be left rudderless against any negative news, especially as we enter the summer lull when volumes are traditionally low.

Recent Sterling (GBP) Articles:

EURGBP Nears Resistance Ahead of ECB Meeting

GBPUSD Price Analysis – Continued Weakness or Nearing Oversold?

The next important date for sterling traders is next Bank of England MPC meeting on August 2, so-called ‘Super Thursday’ when the MPC’s decision and minutes will be accompanied by the Quarterly Inflation Report. Market expectations of a 0.25% rate hike at this meeting are around 68%, indicating that traders see an increase on the cards.

DailyFX Economic Calendar for the week ahead.

The new UK Brexit minister Dominic Rabb met his counterpart Michel Barnier yesterday in Brussels and the EU will give their view on the UK’s White Paper shortly. The latest rhetoric from the EU is that they are increasing their preparations for a no-deal or hard Brexit while the UK refuse to rule out an agreement, albeit on their terms.

GBPUSD Daily Price Chart (August 2017 – July 20, 2018)

GBP: Holiday Lull Ahead But Brexit May Break The Calm

Traders may be interested in two of our trading guides – Traits of Successful Traders and Top Trading Lessons – while technical analysts are likely to be interested in our latest Elliott Wave Guide.

--- Written by Nick Cawley, Analyst

To contact Nick, email him at

Follow Nick on Twitter @nickcawley1

Gold Prices Bounce From Fresh Yearly Lows After Trump Walks Back USD

Short term trading and intraday technical levels

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Gold Prices Bounce From Fresh Yearly Lows After Trump Walks Back USD

Fundamental Forecast for Gold: Neutral

Gold prices fell for the second consecutive week with the precious metal down 1.1% to trade at 1230 ahead of the New York close on Friday. The decline to fresh yearly lows comes amid continued strength in broader risk appetite with all three major US equity indices closing higher on the week- despite building trade war tensions. The market focus has started to shift however as a fresh batch of commentary from President Trump brings into question the both the US trade & monetary policy outlooks. So do these developments really have the potential to shift interest rate expectations OR is this just the spark needed to awaken the long-dormant gold bulls? - The technicals suggest we’ll find out soon.

Trump's Fiscal Drive Meets Powell’s Monetary Push

At this week’s Semi-annual Humphrey Hawkins testimony before congress, Federal Reserve Chairman Jerome Powell reaffirmed the central bank’s pledge to normalize rates amid continued strength in the underlying economy. While the data remains supportive, the Chair did cite concerns over the threat of the ongoing tariff war IF the process were to extend into a protracted dispute. The remarks fueled some strength in the greenback with the US Dollar (DXY) stretching to fresh yearly highs this week.

The game changer for price came late in the week when comments made by President Trump this week sparked some much needed demand for the yellow metal. Trump’s remarks regarding his preference for lower interest rates should come as no surprise to market participants and while markets have turned on the USD near-term, the outlook for interest rates remains rather stable with Fed Fund Futures still pricing a ~58% chance for a fourth rate-hike this year in December.

Gold traders will be taking cues from US Dollar price action next week with the European Central Bank (ECB) interest rate decision and the advanced read on 2Q US GDP highlighting the economic docket into the close of the month. For Gold, expectations that Trump’s remarks could somehow slow the pace of interest rate hikes (although highly unlikely) may have offered a catalyst in price. Alongside weakness in the USD, the event may fuel some further recovery in price and after this week’s reaction, the shorts are on notice. From a technical standpoint however, the damage done by the recent breakdown casts a shadow on the near-term price outlook and the focus is on whether price can build on this rebound next week.

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Spot Gold IG Client Positioning

Gold Prices Bounce From Fresh Yearly Lows After Trump Walks Back USD
  • A summary of IG Client Sentiment shows traders are net-long Gold- the ratio stands at +6.72 (87.0% of traders are long) –bearish reading
  • Long positions are 0.4% higher than yesterday and 14.6% lower from last week
  • Short positions are 22.4% lower than yesterday and 8.0% lower from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Spot Gold prices may continue to fall. Traders are more net-long than yesterday but less net-long from last week and the combination of current positioning and recent changes gives us a further mixed Spot Gold trading bias from a sentiment standpoint.

Review Michael’s educational series on the Foundations of Technical Analysis: Building a Trading Strategy

Gold Weekly Price Chart

Gold Prices Bounce From Fresh Yearly Lows After Trump Walks Back USD

Gold prices broke below a critical support zone we’ve been tracking for months now at the 50% retracement of the late 2016 advance at 1245 backed closely by the 200-week moving average / trendline support at ~1235.” The move marks a clear break of the July opening range, and keeps the focus on a late-month low in price.

The decline saw a strong reaction at the key 61.8% retracement at 1215 into the close of the week and while the broader risk remains lower, a recovery of sorts may be on the cards in the days ahead. Keep in mind, gold prices have seen just 4 up-weeks in the last 14! It’s too risky to begin positioning for a turn, but the threat of a near-term recovery remains evident while above the lower 50-line / 2017 March low-week close at ~1204.

Bottom line: Expect side-ways–to-lower price action with a breach above the median-line needed to suggest a more significant low is in place. For a complete technical breakdown of the near-term Gold price levels (daily & intraday), review this week’s XAU/USD Technical Outlook.

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---Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michaelon Twitter @MBForex or contact him at

CAD Undermined by US Auto Tariff Threat. Hawkish BoC, So What?

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Canadian Dollar Fundamental Forecast: Bearish

  • Canadian Dollar fell despite hawkish BoC, undermined by trade war fears
  • US potentially imposing auto import tariffs could result in more CAD losses
  • Local economic data still tending to underperform, CPI miss could be next

Have a question about what’s in store for Canadian Dollar next week? Join a DailyFX Trading Q&A Webinarto ask it live!

As anticipated last week, the Canadian Dollar headed lower against its US counterpart by the end of Thursday’s trading session. However, its weakness was not because of a ‘dovish hike’ from the Bank of Canada. In fact, the central bank appeared to be all but dovish. Not only did it raise interest rates, but it also alluded to more hikes down the road amidst the current vulnerable global trading environment.

As a result, the Canadian Dollar rose, but gains were short lived. Instead of basking in the prospects of higher rates, CAD was left vulnerable. Falling oil prices, stocks tumbling across the world and a stronger US Dollar signaled market concern about global growth slowing as President Donald Trump threatened to impose additional $200b in Chinese import tariffs. Since then though, those frets have cooled somewhat.

This presents a curious scenario for the Canadian Dollar going forward, and one that may not bode well. Next week, the US Commerce Department will lead two days of hearing about whether or not auto imports pose a national security threat. BoC’s Governor Stephen Poloz has said that those auto tariffs would have a much bigger threat on the economy.

This is because car tariffs could mean slowing economic growth and higher prices. Mr. Poloz added that in regards to this analysis, the inflation part would dominate discussions. As such, the central bank could very well press ahead with raising rates down the road even if the world’s largest economy pushes ahead with those auto levies.

But before you may get hyped up on the prospects of higher returns from Canada and potential Loonie gains, keep in mind of what happened this past week. If trade war concerns dominate headlines again, there could be more crude oil/stock declines & USD gains. Not to mention that auto tariffs could weigh on oil further given that less demand for cars as a result means potentially fewer needs to power those vehicles.

According to Natural Resources Canada, energy’s nominal GDP contribution to the economy was about 10 percent in 2016. This is why CAD sometimes closely inversely follows crude oil prices. In addition to the threat of US auto tariffs, keep an eye out for Friday’s local inflation report. The BoC has reiterated that they are guided by incoming economic data for the timing of its next rate move.

Canadian economic statistics are still tending to underperform relative to economists’ expectations, albeit by an increasingly smaller margin since late-June. There could a chance that weaker CPI pushes BoC rate hike bets further out, thus weakening the Canadian Dollar. With that in mind, the uncertain global trading environment could negate gains from hawkish BoC bets. The fundamental forecast remains bearish.

We recently released our 3Q forecasts for crude oil in the DailyFX Trading Guides page

Canadian Dollar Trading Resources:

--- Written by Daniel Dubrovsky, Junior Currency Analyst for

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

Australian Dollar Braces for CPI, US GDP, ECB and Trade Wars Next

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Australian Dollar Fundamental Forecast: Bearish

Talking Points:

  • Australian Dollar may gain on local CPI report as local data is starting to outperform
  • However, appreciation may not last. US GDP and an ECB rate decision may hurt AUD
  • The risk of trade wars as the US could pursue auto tariffs makes for a bearish forecast

Have questions about the Australian Dollar outlook?Join a free Q&A webinar and have them answered!

Despite a solid local employment report, the Australian Dollar was heading for a weaker week against its US counterpart. The US Dollar was outperforming as Fed Chair Jerome Powell testified to lawmakers, offering more hawkish views on their outlook. Comments from Donald Trump expressing his disdain for higher US rates, while hurting the greenback to an extent, still saw AUD/USD lower for that day.

The following week offers a plethora of event risk for the Aussie Dollar and we shall begin with domestic ones. On Wednesday, Australia’s second quarter inflation report will cross the wires. CPI y/y is expected to increase to 2.2% while the trimmed mean measurement holds steady at 1.9%. The latter is a more underlying reading of inflation which the Reserve Bank of Australia closely follows.

Lately, Australian economic data has been tending to outperform relative to economists’ expectations. A similar outcome here could increase RBA rate hike bets. At the moment, overnight index swaps are pricing in a better-than-even chance of 55.1 percent that the central bank will raise rates in July 2019. Needless to say, an outcome that goes against the central bank’s projections for inflation would bode ill for AUD.

Outside of the country, an economic event that can offer US Dollar volatility is Friday’s local GDP report. The first estimate of US growth for the second quarter points to an annualized pace of 4.0%. This would mean the fastest pace of expansion since the third quarter of 2014. Similar with Australia, US data is also tending to outperform. Thus, the greenback may gain here at the expense of its Australian cousin and vice versa.

Aussie Dollar traders should also be wary of next week’s ECB monetary policy announcement. This is because back in June, the central bank offered a dovish view on raising rates in 2019 after it plans to finish its QE programme this December. The result was broad Euro weakness and US Dollar strength which saw AUD/USD put in its largest daily decline since February. More hesitation from the ECB to raise rates sooner may result in a similar reaction.

Finally, the sentiment-linked currency remains vulnerable to trade wars. On Friday July 20th, the US Commerce Department is supposed to finish its two-day hearing into whether or not auto imports pose as a national security threat. Signs that the world’s largest economy could pursue auto import tariffs against its allies, like it did with the metal tariffs, could dampen sentiment and send AUD lower.

BACKGROUND: A Brief History of Trade Wars, 1900-Present

On Saturday July 21st, G-20 finance ministers and central bankers will meet and trade wars will likely be brought up as a topic. Then next week on July 25th, European Commission President Jean-Claude Juncker and EU Trade Chief Cecilia Malmstrom will meet with Mr. Trump to talk about averting auto tariffs. These events seem likely to result in stock and FX market volatility.

With that in mind, combining the risks ahead creates for a bearish Australian Dollar fundamental trading outlook.

We just released our 3Q forecasts for equities and the US Dollar in the DailyFX Trading Guides page

Australian Dollar Trading Resources:

--- Written by Daniel Dubrovsky, Junior Currency Analyst for

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

New Zealand Dollar May Fall on US Data and Trade Wars. Not RBNZ

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New Zealand Dollar Fundamental Forecast: Bearish

NZD Outlook Talking Points:

  • The New Zealand Dollar fell amidst trade war fears and a lower RBNZ rate outlook
  • Next week’s RBNZ could be a non-event and perhaps lack a volatile NZD reaction
  • NZD may fall as USD rises on local data while stocks are at risk to tariff escalation

Have a question about what’s in store for New Zealand Dollar next week? Join a DailyFX Trading Q&A Webinarto ask it live!

The New Zealand Dollar came under selling pressure as increased trade war tensions between the US and China sent stocks lower during the first part of last week. There, US President Donald Trump threatened the world’s second largest economy with $200b in tariffs. Then, the Kiwi Dollar resumed depreciating as the markets anticipated a flatter outlook for RBNZ rates in the long run.

BACKGROUND: A Brief History of Trade Wars, 1900-Present

Looking to next week, NZD might have room to continue descending. The currency does face an interest rate decision from the Reserve Bank of New Zealand, but that may pass without much volatility. Since May’s monetary policy announcement, there has not been much of economic updates to perhaps materially alter their assessment. Only last week, we had an in-line local GDP report where growth clocked in at 2.7% y/y in Q1.

Back in May, RBNZ Governor Adrian Orr said that he wants to see core inflation to rise before raising rates. Given that we have not had a CPI update since then, this opens the door for the central bank to reiterate the status quo. This being that a rate cut is just as much likely as a hike next. Given how low rate hike expectations in New Zealand already are for the end of the year, there is not much room for disappointment left.

With that in mind, domestically speaking we may seem some heightened Kiwi Dollar price action on a trade balance report Tuesday. Lately, New Zealand economic data has been tending to underperform relative to economists’ expectations. But this has been by increasingly less so since the middle of May. Net exports (another word for trade balance) is a component of GDP and can thus impact economic growth down the road.

Externally speaking, a loaded US economic docket has the potential to further bolster Fed hawkish expectations. From the world’s largest economy, we will get consumer confidence, GDP and the Fed’s preferred measure of inflation (Core PCE). Unlike New Zealand, US local data has been tending to cross the wires slightly better than expectations in recent weeks. More of the same may boost USD at the expense of NZD.

Finally, do keep an eye on how trade tensions continue brewing in not just the week ahead, but thereafter. Since the US additional tariffs threat, China has prepared a list of reciprocal measures. Signs of further escalation risks dragging down global stock prices and with it, the sentiment-sensitive New Zealand Dollar. As such, the fundamental forecast for it will have to be bearish.

New Zealand Dollar Trading Resources:

--- Written by Daniel Dubrovsky, Junior Currency Analyst for

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter