Dollar Nears 2016 Finish Line
The greenback has been a star performer since Trump’s market shaking presidential victory in November with the currency on track to finish the year near 14 year highs as a king amongst the major currencies. Sentiment remains firmly bullish towards the dollar with the cocktail of positive US domestic data, hawkish Fed comments and heightened expectations of an improvement in U.S economic growth magnetizing investors to the currency.
With speculations heightened over the Fed raising US interest rates further in 2017, the dollar should remain king in the beginning of 2017. As the year slowly comes to an end, price action may control where the dollar ventures, with the current upside momentum on the daily timeframe suggesting further gains. A decisive breakout above 103.50 on the Dollar Index could trigger an appreciation towards 105.00.
Currency spotlight – EUR/USD The terrible combination of political risks from Italy and uncertainty ahead of the French presidential elections could ensure the Euro stumbles into 2017 under renewed pressure. Buying sentiment towards the euro remains remarkably low, with the pergence in monetary policy between the Fed and ECB encouraging sellers to attack the EUR/USD repeatedly. Many technical traders may pay extra attention to how prices react to the 1.050 price level which if defended may provide an opportunity for bears to send prices back towards fresh 14 year lows. A breakdown below 1.040 could spark a selloff towards 1.035 and potentially lower.
Commodity spotlight – Gold Gold was pummelled by a resurgent dollar in the final quarter of 2016 while prospects of higher US rates in 2017 eroded investor attraction towards the zero-yielding metal. The greenback’s rise to prominence has left gold under intense pressure with the current trajectory pointing to the downside. A situation where the Federal Reserve starts to raise US rates in the New Year may trigger steeper declines. Although risk aversion from the political events in Europe may elevate gold, sellers could take advantage the technical bounces to send prices much lower. This metal remains under serious pressure on the daily timeframe and sellers could exploit the $1150 resistance to send prices lower towards $1125.
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