The Dollar Forecast Don’t Count On A Dovish Fed

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    The Best Binary Options Broker 2020!
    Good for Beginners!
    Free Education + Free Demo Account!
    Get Your Sign-Up Bonus Now!

  • Binomo
    Binomo

    Only For Experienced Traders!

The Dollar Forecast: Don’t Count On A Dovish Fed

The Dollar, It Retraced Itself

The dollar index has given up all but the last little bit of its 2020 gains. The move is driven by an increasing expectation the FOMC will cut rates this year and that expectation based on the coronavirus. The coronavirus is spreading around the world, mark my words, the Wuhan Flu is coming to a neighborhood near you. But it’s not that big a deal, not really. No more than a bad case of the flu the pandemic is largely expected to run its course and then we’ll all be back to business. The biggest threats are to corporate earnings and GDP growth.

The Fed, for its part, is still data driven and the data is good, the U.S. economy on solid footing despite two years of trade war. I’ve not know the Fed to act pre-emptively ever so the hope they will try to front-run viral impact to the U.S. economy is misplaced. At least in my opinion. This week we may see things change, there is quite a bit of data on tap, but I don’t think it will support the idea of 1 much less 3 FOMC rates this year.

Topping the list is the Beige Book. The Beige Book report is due out on Wednesday, it is a summary of economic activity across the 12 Federal Reserve operating regions. They key information within this report will be the labor data. The Fed has been reporting tight labor conditions, shortages of workers, and rising wages for many quarters. If that changes we may be in for a deep market correction and contraction of the dollar but I don’t think so.

Along with the Beige Book is the monthly labor data bundle including the ADP, Challenger, and NFP reports. These should show job gains, unemployment, and wages on trend if not accelerating. With that scenario in play, the outlook for the FOMC and rate cuts is going to change and that I think will put a bottom back in the dollar.

The DXY Technical Analysis: Ranges Rule, The Next Leg Is Probably Higher

The DXY shed close to -3.0% over the last week as traders flooded into safe-havens like gold and the yen. This move has erased nearly all the 2020 gains but has not broken support. My best support target is near $97.12 and, so far, buyers are holding prices well above that level. The long-term trend in the dollar is sideways. The $97.12 level is near the bottom of the long-term range so I expect it to hold and confirm as support and point of reversal. That could happen this week as the data is released so traders are cautioned to not get overly bearish with thier dollar trades this week.

US Dollar Forecast; This Is A Make Or Break Moment For The Bulls

The US Dollar Forecast Is Bullish

The U.S. dollar forecast is bullish. The index has been under pressure in recent weeks but that is over. The FOMCs new policy stance says no more cuts, the latest round of labor data supports that view, and he Dollar Index is showing signs of reversing. The chart is in the late stages

of a double-bottom reversal that could easily take the index back up to retest its recent highs. The indicators support this view in that 1) MACD confirms support at this level and 2) stochastic is doing the same. Both indicators are now set up to fire what I like to call the strong-buy signal, the only risk to traders is that is has not yet come.

What is the strong buy signal? It is a buy signal that forms when price action confirms a bottom and the indicators confirm the bottom at the same time. What happens is a drop to support, a bounce, and then another drop to support and second bounce. The second bounce is usually higher, starting from a higher price-point, but not always as is the case here. Here we have a double-bottom in process, possibly. What makes this such an attractive possibility is the indicators. The confirm support by diverging from the second low. If the market were heading lower it is likely MACD and stochastic would have created deeper peaks than they did.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    The Best Binary Options Broker 2020!
    Good for Beginners!
    Free Education + Free Demo Account!
    Get Your Sign-Up Bonus Now!

  • Binomo
    Binomo

    Only For Experienced Traders!

The trick now is waiting for the confirmation. A move up from this level is the first indication a reversal is in progress but not the best. If the move up is confirmed by bullish crossovers in the indicators that’s better but still not the best signal. The best signal will be when the DXY moves up to the $98 level and break above resistance. Resistance is in the form of the short-term moving average but, more importantly, the baseline of the double-bottom that is possibly in play. A move above that level would confirm a full reversal.

A look at the EUR/USD highlights the potential for reversal. The EUR/USD is forming a potential double-top that is virtually the exact reflection of the DXY. The pattern’s top is resistance just above 1.1155 and noticeably lower than the previously broken support. The indicators are likewise diverging from the new peak and indicate an underlying weakness in the market. The divergence may not result in a reversal for this pair but the outlook is not good. A fall from current levels would confirm the top, a move below 1.10775 would confirm reversal.

Funds Short the Dollar After Fed’s Dovish Pivot

(Bloomberg) — The Federal Reserve’s dovish shift is beginning to diminish the dollar’s appeal for currency speculators.

A Citigroup Inc (NYSE: C ). index has dropped below zero for the first time since March 2020, indicating currency funds are holding net short positions on the U.S. currency. That signals further dollar gains may be hard to come by after the greenback’s longest winning streak in three years.

“The Fed has become much less willing to hike, and there’s even a chance for a rate cut this year,” said Toshiya Yamauchi, chief manager for foreign-exchange margin trading at Ueda Harlow Ltd. in Tokyo. “This has eroded the dollar’s yield advantage, leading to dollar shorts.”

The Bloomberg Dollar Spot Index gained 0.1 percent as of 10:09 a.m. London time, having dropped Tuesday after an eight-day rally. That winning streak followed the Fed’s Jan. 30 decision — when Chairman Jerome Powell said the case for further rate hikes has weakened — that took many investors by surprise.

Even so, economists predict the dollar will weaken against the euro, yen and pound throughout 2020, according to Bloomberg surveys. And with U.S. economic growth and inflation forecast to slow this year, overnight-index swaps have started to price in a possible Fed rate cut. Publication of CFTC positioning data for the greenback since Jan. 15 has been delayed due to the U.S. government shutdown.

“We don’t have evidence of strong inflationary pressures and we do have evidence of the growth rate slowing,” Fed Bank of Cleveland President Loretta Mester told reporters after giving a speech in Cincinnati Tuesday. “That combination of factors suggests we have this chance to look at how the economy is going to proceed. We don’t have to do anything preemptively.”

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    The Best Binary Options Broker 2020!
    Good for Beginners!
    Free Education + Free Demo Account!
    Get Your Sign-Up Bonus Now!

  • Binomo
    Binomo

    Only For Experienced Traders!

Like this post? Please share to your friends:
Binary Options Trading
Leave a Reply

;-) :| :x :twisted: :smile: :shock: :sad: :roll: :razz: :oops: :o :mrgreen: :lol: :idea: :grin: :evil: :cry: :cool: :arrow: :???: :?: :!: