The US Dollar index and the international environment

The US Dollar index and the international environment

Fundamentals

From the investors’ point of view, the year 2020 starts on a positive note. As Donald Trump highlighted in his shining speech in Davos on Tuesday, the United States have almost entirely reconfigured the global trade setting. Thanks to the current administration (as per Mr. Trump), the country is now in a much-improved position, in relation to other countries. US-China deal, US-Canada-Mexico agreement, other coming deals with the UK, Japan, and South Korea – all of that surely brings more certainty to the global economic vibe. Particularly, it brings more risk appetite among investors, who now prefer something more adventurous than the US Dollar. In consequence, demand for the greenback is weakening, putting it under pressure. That is exactly what the US President wants to see: as he strongly supports the US exports, depreciation of the USD benefits American exporters. Hence, the question is, how long the environment will be reassuring enough to keep investors away from the US dollar, favoring US merchandise and services sold abroad, to the lasting joy of Donald Trump.

Technicals

US Dollar Index

Since Summer 2018, the US Dollar index has been showing a rising trend, due to the US-China trade conflict and other negative influence factors arising in the midst of this trade war. Altogether, that kept investors interest in the US Dollar at high levels, and demand for the currency was growing. However, October 2019 was the month when it became finally clear that the US and China are indeed willing to put an end to the trade disputes. In confirmation, the Phase One deal to be signed later on was announced. Consequently, investors felt safer and stopped fleeing accumulating reserve assets, and the US Dollar in particular.

1.png

That’s why since then the two-years uptrend is very close to a reversal. The current level of 97.35 is a local high. It was reached when the index bounced back up after dropping to 96.10 – the summer-2019 low. Also, a “death cross” was formed by the 50-day Moving Average crossing the 200-day upside-down – that’s about the resistance level of 97.50, which is tested by the index currently. If the index breaks it on the way up, it will be likely to touch the secondary resistance of the 100-day Moving Average at the level of 97.70. Otherwise, if the trajectory makes another dive down as it seems likely to, the support of 96.80 will be the first threshold to check the downward movement. If it is passed, the index will aim at the support of 96.10, questioning the entire long-term uptrend.

EUR/USD

The daily chart of EUR/USD confirms the tendency and time zones we have noted with the US Dollar index. Since the first part of 2018, the Euro has been consistently depreciating against the USD. But that changed in Autumn 2019 for the reasons explained above. Currently, the price is at 1.1090 – that is a bounce back after it reached 1.1220, a summer high. At the same time, that is about the area where the larger downtrend collides with the local upswing. If the uptrend climbs to the resistance of 1.1220 again and goes further, we will see a new long-term trend forming.

2.png

Conclusion

The short-term seems to offer a relatively high probability of the US Dollar index climbing to the local resistance. But in the mid-term, if the peaceful economic environment doesn't change, there is high likelihood that it will go further down in course of depreciation of the American currency. Watch the levels, stay updated, and trade smart!

                                                                                         LOG IN 

Similar

Latest news

AUD/JPY may fall further

AUD/JPY is in the downtrend since the start of the year. It was capped on the upside by all the three important moving averages on the D1.

Deposit with your local payment systems

Learn more

Callback

A manager will call you shortly.

Change number

Your request is accepted.

A manager will call you shortly.

Internal error. Please try again later

Beginner Forex book

Beginner Forex book will guide you through the world of trading.

Beginner Forex book

The most important things to start trading
Enter your e-mail, and we will send you a free Beginner Forex book

Thank you!

We've emailed a special link to your e-mail.
Click the link to confirm your address and get Beginner Forex book for free.

You are using an older version of your browser.

Update it to the latest version or try another one for a safer, more comfortable and productive trading experience.

Safari Chrome Firefox Opera