The US Dollar

The DXY, which is a standard measure of the $US, has been staying on the 100 mark for about two years. The FED changed its course of low interest rates and quantitative easing and the pattern of appreciation has stopped. The FED has introduced the next step of their economic plan which is to increase interest rates and getting rid of the mortgage loans they bought because of the 2008 financial crisis. An increase in interest rates usually appreciates the currency, but is not 100% or happening this time. Also, .25 increases from the FED still very low increments from normal standards before the 2008 crisis. With future expectation of more interest rates hike there is a high probability for the DXY to stay around the 100 mark.

The EURUSD has shown some technical resistance above the 1.0 mark. Fundamentals still point for the EURUSD to keep depreciating, but since the beginning of 2017 it hasn’t done it. Now the pair looks like it could break to the upside. If EURUSD appreciates with the FED increasing interest rates, there is a high probability the EURUSD will continue to appreciate. The ECB also has negative interest rates and they will increase in the future which supports the idea of an appreciation of EURUSD.

The next FED meeting is in the middle of June. On May 24 the FED would release their minutes and that would be a window on what the FED are planning to in the coming up months. This would also be a confirmation on whether the down patter would continue or a floor has been established. 

Don Melon Change

Don Melon Change

Trading analysis for January 2017

The DXY has been trading above the 100 since a few weeks before the FED interest rate hike in December. In the past days from Thursday, January 26, 2017, the DXY has corrected itself and found support at 100. The 100 support has been hit twice; once around December 2016 and a few days ago from January 26.  On Thursday, January 26, 2017 the DXY has bounce back from the 100 mark and the EURUSD hit a psychological resistance at 1.075, which is a good place to short the pair. Another reason 1.075 is a good place to short the EURUSD is: it hit the .50 Fibonacci mark from 1.00 to 1.15 which have shown support and resistance in the pass.  If EURUSD continues the depreciation pattern, there is a high probability EURUSD might hit 1.00. 1.00 would be a good place to close the trade. Other pairs like NZDUSD show the same resistance pattern. NZDUSD is trading around 0.72 at the moment. NZDUSD still has an uptrend pattern in the long run even thought for the short to medium term it shows a high probability of depreciation to 0.70 which it has shown support for the NZDUSD.

            The idea of commodity currencies appreciating as mention before and in other entries still stands and it has been withholding. This idea is another factor of going long on NZDUSD around the .70 mark.  This strategy is something to look at and it would consist of holding the trade for a long-term period. The long-term is consider to be one plus years and the strategy would take advantage of the higher over night interest rate the Reserve Bank of New Zeeland is giving.