The last couple of two months has been reigned by the dollar bulls. The dollar gained a huge amount of strength in the global market and pushed all its major rivals lower in the ground. The increase fiscal spending and tax cut policy statement from Mr. Trump gave the green bucks its first bullish boost in the year 2016.The dollar rallied higher in 8th November 2016 during the event of U.S Presidential election and it is clearly visible in the trading charts. Most of the investors were in fear about Mr. Trump since he has anti-social and trading policy tendency and they thought that Mr. Trump winning will weaken the dollar in the global economy. But being a businessman Mr. Trump hit the right area in the global market and created an extreme level of positive sentiment among the U.S consumers. However, leading researchers are thinking that if Mr. Trump fails to implement his statement in the real market the dollar will become significantly weaker against its all major rivals. In the eyes of trained professional, the dollar bulls have a very hard time since the year 2017 is full of high impact decisions.
Possible three rate hikes by FED: The dollar gained its last strongest boost in the year 2016 after the long anticipated rate hike in the last FOMC meeting minute. The FED raised their interest rate on the basis of 25 points and created a strong surge in the U.S dollar index. The U.S dollar index is the measure of the overall strength of the U.S dollar in the global economy against the major six currency pairs in the world. The index hit a 14 years record high in trading charts and gave the dollar its strongest boost of the year 2016.Most importantly FED chairperson Janet Yellen has stated that they are going to raise their interest rate three times in the next year and such a strong optimistic statement from the FED chairperson created a strong bullish sentiment in the US dollar. However leading currency analyst is thinking that three rate hike will be extremely difficult by the FED as they need to be extremely careful about the immature rate hike. Investors are in fear since an immature rate hike will significantly weaken the U.S economy in the longer time frame. Despite this crisis the U.S central bank will also pressurize the FED for at least two rate hike before the month of November since they need to adjust their inflation rate in order to maintain the global stability.
Dollar bulls started their bullish recovery: In the last year the dollar index fell from its 14 years high in trading charts and pushed the dollar lower on the ground against all its major rivals. Due to that weakness, the gold market gained a huge bullish momentum and kicked off from a critical support level in the market. In this week the U.S dollar index gained a decent percentage in the global market for about 1.04% and traded at 103.42.However, the index fell on the last Friday after hitting the critical resistance level at 103.65 level. Most of the professional traders are thinking that the green bucks will gain a significant amount of strength in the month of January as it remains broadly supported in the global economy. However, some of the overly cautious traders are thinking that the current strength of the green bucks has been faded out in the market and for another strong bullish rally it needs an extensive positive U.S news release. The Great Britain pound traded at 1.2280 level on the event of the bullish recovery of the U.S dollar. The EURUSD pair suffered an extensive loss in the market and erased most of its bullish gain of the last trading week.
The impact of U.S dollar emerging strength in the forex market: Due to the recent bullish recovery attempt by the green bucks the EURSUD pair suffered the most. After hitting the critical resistance level at 1.06552 the EURUSD pair sharply fell to the ground due to the recent strength of the green bucks. The pair touches a critical support level at 1.03405 in the market. However, the pair found some decent support from that level and many investors went long from that points since there is bullish morning star formation on the weekly chart. The EURGBP pair secured two consecutive in the global market but after that, it dropped to 0.67% percent in the global economy and traded at 0.8457.There has also been a sharp rise in the UK manufacturing purchasing managers’ index and due to this event the Great Britain Pound survived the initial blow of the U.S dollar index and didn’t suffer extensive loss. However, the Aussie dollar was remain supported in the global market and went up by 0.39 % and traded at 0.7213.
Summary: The market decent volatility in the forex market is gaining coming back after the Christmas holiday. Most of the professional traders are thinking that the market has absorbed the intensive heat of the green bucks and it needs fresh buying power for another bullish rally. However, some of the investors are thinking that the dollar will rally higher in the global market as FED projected possible three rate hikes in the year 2017.Considering all the facts the financial market is now suffering from an extreme level of uncertainty and most of the professional traders will remain on the sideline until the market gives a clear indication of its movement.