he USD Price Outlook is showing a slight downtrend. This downtrend is being led by the expectations of the Bank of England to normalize the Bank Rate. The BoE released their view that the UK economy is near the danger zone and there is a risk of recession. The BoE’s base view is that the BoE will hike interest rates when inflation pressures are high.
The European Central Bank has also issued a report that they believe the euro is overvalued. In the past the EURUSD market was considered overvalued but the recent reports indicate that this market is now near the fair value. The Bank of Japan and the Bank of Canada have also issued reports that suggest that there is a danger to the health of the Japanese and Canadian economies. These central bank reports have caused many share prices to drop in the United States market. The market was lowered in Asia as well.
The United States economy is currently undergoing a recovery phase. It is experiencing a recovery due to the stimulus package and QE. The current economic cycle is being supported by the low interest rate, easy money and quantitative easing programs. The dollar is no longer a major factor when trading forex. Forex traders have lost confidence in the US economy.
In addition, with economic growth slowing, the markets are now indicating strength in Germany, Australia and New Zealand. It is implied that the euro will weaken against the dollar as the European Central Bank lowers its interest rates. This will weaken the euro against the dollar and allow for a stronger euro to help strengthen the EURUSD and USD in the markets.
In continuation, we will see USD strength versus other major currencies. We will also see a continued strengthening of the USD and a continuation of the current trend in oil. USD and oil go hand in hand. USD will continue to strengthen versus many other currencies. We will see more over the next few months.
The recent economic data released by the economists all indicates that there will be a slow but steady increase in the growth in the U.S. economy. The indicators do not point to any sign of a slowdown in the rate of economic growth or unemployment. We will see the strength of the USD continues to move in a sideways pattern during the coming quarters.
Traders who trade the USD expect the price to continue to move in a sideways pattern until the end of the year. They may begin to expect a breakout at the end of this year. There is a high probability of breakouts in the coming quarters. This is especially so if the Fed begins to raise interest rates from their current historic lows. The rate hike will have a negative impact on the USD and this will weaken the currency versus the other major currencies.
Traders who trade the USD are not under any illusion that the Federal Reserve is not taking action to raise rates. The data released by the FOMB indicates that the rate cuts will occur only to the upside and not to the downside. This means that the traders who trade the USD will most likely enjoy some short-term gains as the Federal Reserve continues to sit on its hands. USD/AUS currency pairs are expected to benefit from the Fed’s actions, but they are not expecting a rapid rise in the USD price or a reversal of the current trend.
Another reason why traders who trade USD expect no breakout in the price against the major currencies is the absence of fundamental reasons supporting such an increase in the USD price. The economic data released by the Federal Reserve does not indicate any pick up in inflation. In fact, there is a global economic deflation that has affected all economies worldwide. This implies that the effects of the recession are being felt in the US economy as well.
On the other hand, if the US Federal Reserve was to start printing more money to fight inflation then there would be a major support for the USD. Traders who trade USD expect the trade deficit to narrow, which would put pressure on the dollar and USD price. Such a move would indicate that the Federal Reserve is planning to cut its rate cuts to bolster the economy. If this happens the trade deficit will widen and the USD would benefit from this.
USD price outlook: No breakouts in the USD price are possible in the event that there is no change in the economic data. In fact, the market is moving in a sideways manner and there are no clear signals of a move towards the greenback. Hence, traders can expect the continuation of the USD trend and the current oversold conditions in the market. The economic data will justify that there will be no movement in the USD price against the major currency pairs in the near future. The only scenario where the trade may resume with some force is when the Federal Reserve starts reducing its rate cut