On March 21, 2018 the FED increase their overnight interest rate by .25% to 1.50 – 1.75. This made the DXY, which is the US dollar index, to depreciate from 90.37 on March 20 to 39.40 on March 22. At the moment Tuesday, April 10, 2018, 6:05 EDT, the DXY is at 89.62, almost one whole point lower than before the FED interest rate decision. This is an indication for the time being, the DXY will have a higher probability of depreciation than appreciation. This is because even with an increase in the overnight interest rate, a fact that tends to appreciate the currency, it created the opposite - a depreciation in the US dollar. This pattern is expected for the next interest rate decisions by the FED if the FED keeps their three rate hikes for 2018 plan. The next FED interest rate decision is May first. This gives the month of April a high probability of US dollar to depreciate and because the previous FED interest rate decision created a depreciating signal there is a high probability the next interest rate decision would be the same. That is if the FED decides to increase their interest rate in May which they may not. Thus, creating another signal for depreciating US dollar. This type fundamental indication creates a depreciating US dollar trading strategy.

Security markets across the world have been in a correction. With the S&P 500 dropping from 2,762.13 on February 2, 2018 to 2,613.16 April 9, 2018. Also, The Nikkei 225 has drop significantly since the start of 2018 as well as FTSE 100. When a correction occurs the money from the stock markets tends to get converted to US dollar, which is seen as a safer asset than stock. The US dollar is also easier to convert to other asset in the world because of general acceptance by people. This are factors of appreciating US dollar, but the DXY and currency pairs like AUD/USD have not shown that.

For pairs like the AUD/USD a bull technical pattern is forming and fundamental indicators like no FED interest rate hike in April supports the upside pattern. The DXY has also been having trouble breaking the 90.00 mark and AUD/USD has created a channel seen bellow on the weekly AUD/USD. This would be a good point to enter a long position trade for AUD/USD, because there is a higher probability the AUD/USD would go up given the factors mention above.  

 

 

US DOLLAR

The US Dollar has depreciated since the last post. At the moment, Jan 29, 2018, 5:58 p.m. EST, DXY is at 89.37.

A few days ago from January 29 during Davos, the president of the US said "he expects a stronger dollar". Just because he said it doesn't make it true, but now there some perception the US economic policy has change to a appreciating dollar. Because of that fact, it would be difficult to try to predict the trend, thus increasing the probability of losses. Situation when a head of state of central back president talks about changing economic policies increases the risk. The price of the currency may shift. Because risk has increase, it would be a good idea to be off the markets until new clues emerges of where the price of currency pair may go. US State of the Union is tomorrow the January 30th where clues about future economic policy may be said. Also the FED is going to give their interest rates decision on the 31st. This two social factors could lead to more clues to where there the dollar is going to appreciate or depreciate.

The price of: currency, commodity, security, reflects social factors like: unemployment and central banks policy. The goal is to find patterns that match social factors: central bank policies, with trends on prices of currencies like EURUSD or prices of other assets. If done properly and having an understanding of risk, it could be profitable.