Top Story

Dollar Index defends 100 as focus turns to US GDP

It has been a rather quiet day so far in the markets. Traders have been sitting on their hands after the recent volatility, as they probably await the release of US GDP at 13:30 GMT. The world’s largest economy is expected to have grown by 2.1% on an annualized basis in the fourth quarter of last year. If correct, growth would be down sharply from 3.5% recorded in Q3. Given the subdued expectations, a positive surprise here could see the dollar surge higher. But a small negative surprise of below 2.1% may not cause the dollar to weaken noticeably, unless the data comes in really weak. This is because Donald Trump’s ambitious fiscal plans point to stronger growth in the coming quarters, and traders may not pay much attention to what had happened in the past.

So whichever way you look at it, there is an increased likelihood that the dollar may end the day higher than lower. In fact the Dollar Index has already formed a reversal-looking price pattern on its chart on Thursday, which points to further strength for the greenback. Thursday’s bullish engulfing candlestick formation clearly highlights a change in the direction from selling to buying pressure. The shape of the candlestick is important but it wouldn’t mean much if it was formed at a random price location. But as can be seen from the chart, this bullish pattern was formed around the 100 handle. This psychologically-import level had been strong resistance in the past, and after the breakout in November, it has held as support on a daily closing basis on several occasions now. Put another way, the sellers have had difficulty to push the dollar below this level, suggesting that the bullish trend is still just about holding firm for the dollar. This view would change should 100 break on a daily closing basis. Until and unless that happens, one can only assume that the most likely outcome is for the dollar rally to resume. A few levels of support (blue) and resistance (red) are shown on the chart. 

Source: eSignal and

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 or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

The markets are moving. Stop missing out.