Dollar at critical juncture ahead of US inauguration
James Chen, CMT January 18, 2017 6:20 PM
The near-term trajectory of the dollar will depend largely on the path of economic growth under Trump and the resulting interest rate landscape going forward. While the Federal Reserve was cautiously more hawkish late last year in view of Trump’s aggressive fiscal stimulus plans, it remains to be seen if or when Trump will make good on key aspects of his promised agenda.
Complicating matters further for the dollar, Trump’s unpredictability was highlighted once again over the past weekend when he said in an interview that the dollar was too strong, particularly against the Chinese yuan. This helped prompt a sharp dollar sell-off on Tuesday. Generally, the run-up to Friday’s presidential inauguration has been characterized by markets being pulled back and forth amid policy confusion and mixed anticipation over the incoming administration. This confusion has been exacerbated by impromptu tweets and comments directly from the president-elect.
At least until markets get a better sense for how the new Trump Administration will perform after inauguration, and how the Fed may move forward as a result, current pressures on the dollar could continue for the time being.
From a price perspective, as mentioned, the dollar has been entrenched in a pullback since the beginning of the new year. On the USD/CHF chart, this has resulted in a clean breakdown below the key 1.0100 level to hit major psychological support back down at parity (1.0000). In the process, the currency pair has also just broken down below a rough head-and-shoulders reversal pattern, a typically bearish indication. Currently trading just above parity, USD/CHF could potentially be pressured further in the near-term to break down below 1.0000. In the event of such a breakdown below parity, the next major downside target is at the key 0.9800 support level.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.