The United States Dollar, in 2015, played a substantial role in the financial marketplace. For currency traders who were bullish on the dollar, it was the year for them. These traders made substantial gains all throughout the year. Weighted dollar index did very well and gained double digits within every one of the main currencies which includes the Euro, Australian dollar and the Canadian dollar. The gain, as expected, in the dollar had substantial spill-over effects to additional asset classes. Many American companies that had exposure to international markets severely suffered from currency related losses. Commodities, at the same time, were hammered. Gold experienced one of its worst years since the crisis in the financial industry. Bloomberg commodities index also was close to the bottom.
In 2015, the dollar strength was as a consequence of the strengthening U.S. economy that marginally grew within the year. The economic information released during that time painted the image of an economy which is recovering. The employment rate is rising as is the instance with wages. As the Fed’s inflation target of 2 percent wasn’t reached, there are indications that with the falling oil prices and tightening monetary policy, it ultimately will be reached within the coming year.
All focus is going to be on the USD in 2016. Traders and investors will look at numerous issues that will decide how they’ll allocate capital to gain from all movements in the USD. The primary concentration as was with 2015 is going to be the economy in the United States. Investors, in this, will pay attention to the critical economic information like the ones associated with employment, inflation, and trade balance amongst other ones. An improving economy is going to produce more fed intervention to raise interest rates. Investors, today, are forecasting four hikes within the year. If this occurs, odds are that the USD will trade higher.
The U.S. data won’t be the sole key player in deciding the dollar pricing in 2016. Additional important global factors ae going to play a substantial role in all of these. China, for one, is going to be a vital factor to be on the lookout for this year.
Within the September meeting with the Fed’s, it widely was expected that they’ll boost interest rates. One month prior to the meeting happening, however, news arrived that the economy in China was undergoing problems. Their economy was weakening—that caused an intervention from the communist government. It devalued its currency, and implemented severe steps within their stocks exchange. Those measures worked. The primary indexes recovered a few of the losses and the Fed stopped its process of normalization. All eyes now will be fixed at the economy in China because what occurs (bad or good) is going to have substantial spill-over effects around the world.
Also, the emerging markets will have huge impacts on the USD this year. Many emerging marketplaces countries like Argentina and Brazil are heavily reliant upon commodities. It made 2015 their worst period since prices of commodities bottomed out. The impacts were massive with most countries’ economies declining. Experts, this year, think there might be some recovery within those countries. For agricultural based economies like Brazil, the engoing el-nino might see their commodities rise in price. It might assist their currencies in recovering.
The question most traders and investors are asking is on whether the USD reached a ceiling or whether the continual increase will continue. The fact is that no one knows. It’s expected that the factors above, however, are going to be the important determinants of the price of the dollar. Actions of additional central banks also will be key to the USD. We’ve seen Kuruda, Bank of Japan governor, estimate that the bank is going to continually ease. The same has been the instance with Mark Carney, Bank of England governor. This divergence probably will continue in 2016 which is going to further complicate the situation with the dollar.
The USD Should Advance on a Solid Economy
Morgan Stanley say they predict the pound to dollar rate of exchange to dip to 1.53 by the end of the 1st quarter of 2016, as well as 1.52 by mid-year.
The rate of the euro / dollar should decline toward 1.11 by March of 2016 prior to a low of 1.08 being attained by mid-2016.
The GBP/USD is pushing higher and broke the resistance that was implied by the uptrend channel’s upper bound. The hourly resistance at 1.5509 was broken and hourly support is provided at 1.5330.
Stronger support was given at 1.5165.
The technical structure, in the longer term, looks as if a recovery bottom whose maximal upside probability is provide by the solid resistance at 1.6189 (Fibo 61 percent entrancement).