Best of the Week
Most Popular
1. Ray Dalio: This Debt Cycle Will End Soon - John_Mauldin
2.Stock Market Dow Plunge Following Fake US - China Trade War Truce - Nadeem_Walayat
3.UK House Prices 2019 No Deal BrExit 30% Crash Warning! - Nadeem_Walayat
4.What the Oil Short-sellers and OPEC Don’t Know about Peak Shale - Andrew_Butter
5.Stock Market Crashed While the Yield Curve Inverted - Troy_Bombardia
6.More Late-cycle Signs for the Stock Market and What’s Next - Troy_Bombardia
7.US Economy Will Deteriorate Over Next Half Year. What this Means for Stocks - Troy_Bombardia
8.TICK TOCK, Counting Down to the Next Recession - James_Quinn
9.How Theresa May Put Britain on the Path Towards BrExit Civil War - Nadeem_Walayat
10.This Is the End of Trump’s Economic Sugar High - Patrick_Watson
Last 7 days
Stock Market Topping Formation as Risks Rise Around the World - 11th Dec 18
The Amazing Story of Gold to Gold Stocks Ratios - 11th Dec 18
Stock Market Medium term Bullish, But Long Term Risk:Reward is Bearish - 11th Dec 18
Is a Deleveraging Event about to Unfold in the Stock Market? - 11th Dec 18
Making Money through Property Investment - 11th Dec 18
Brexit: What Will it Mean for Exchange Rates? - 11th Dec 18
United States Facing Climate Change Severe Water Stress - 10th Dec 18
Waiting for Gold Price to Erupt - 10th Dec 18
Stock Market Key Support Being Re-Tested - 10th Dec 18
May BrExit Deal Tory MP Votes Forecast, Betting Market Analysis - 10th Dec 18
Listen to What Gold is Telling You - 10th Dec 18
The Stock Market’s Long Term Outlook is Changing - 10th Dec 18
Palladium Shortages Expose Broken Futures Markets for Precious Metals - 9th Dec 18
Is an Inverted Yield Curve Bullish for Gold? - 9th Dec 18
Rising US Home Prices and Falling Sales - 8th Dec 18
Choosing Who the Autonomous Car Should Kill - 8th Dec 18
Stocks Selloff Boosting Gold - 8th Dec 18
Will Weak US Dollar Save Gold? - 7th Dec 18
This Is the End of Trump’s Economic Sugar High - 7th Dec 18
US Economy Will Deteriorate Over Next Half Year. What this Means for Stocks - 7th Dec 18
The Secret Weapon for Getting America 5G Ready - 7th Dec 18
These Oil Stocks Are a Ticking Time Bomb - 7th Dec 18
How Theresa May Put Britain on the Path Towards BrExit Civil War - 7th Dec 18
How easy is it to find a job in the UK iGaming industry? - 6th Dec 18
Curry's vs Jessops - Buying an Olympus TG-5 Tough Camera - 5th Dec 18
Yield Curve Harbinger of Stock Market Doom - 5th Dec 18
Stock Market Crashed While the Yield Curve Inverted - 5th Dec 18
Global Economic Outlook after Trump-Xi Trade War Timeout - 5th Dec 18
Stock Market Dow Plunge Following Fake US - China Trade War Truce - 5th Dec 18
Subverting BREXIT - British People vs Parliament Risks Revolution - 5th Dec 18
Profit from the Global Cannabis Boom by Investing in the Beverage Industry - 4th Dec 18
MP's Vote UK Government Behaving like a Dictatorship, in Contempt of Parliament - 4th Dec 18
Isn't It Amazing How The Fed Controls The Stock Market? - 4th Dec 18
Best Christmas LED String and Projector Lights for 2018 - Review - 4th Dec 18
The "Special 38" Markets You Should Trade ebook - 4th Dec 18
Subverting BrExit - AG Confirms May Backstop Deal Means UK Can NEVER LEAVE the EU! - 3rd Dec 18
The Bottled Water Bamboozle - 3rd Dec 18
Crude Oil After November’s Declines - 3rd Dec 18
Global Economic Perceptions Are Shifting - Asia China Markets Risks - 3rd Dec 18
Weekly Charts and Update on Equity Markets, FX Trades and Commodities - 3rd Dec 18
TICK TOCK, Counting Down to the Next Recession - 3rd Dec 18
Stock Market Key (Short-term) Support Holds - 3rd Dec 18
Stocks Bull Market Tops Are a Process - 3rd Dec 18
More Late-cycle Signs for the Stock Market and What’s Next - 3rd Dec 18
A Post-Powell View of USD, S&P 500 and Gold - 2nd Dec 18
Elliott Wave: SPX Decision Time Is Coming Soon - 2nd Dec 18

Market Oracle FREE Newsletter

How You Could Make £2,850 Per Month

Time To Short the U.S. Dollar?

Currencies / US Dollar Nov 07, 2016 - 05:53 AM GMT

By: Chris_Vermeulen

Currencies

The dollar rally has been led in hopes of the FED tightening rates in December of 2016. While most of the other developed nations are still struggling with low inflation, the U.S.Government provided data that has been largely supportive of a rate hike.

The sharp rise in the dollar had taken it to extreme levels against the EURO, as shown in the Bloomberg chart below.The reversal was due, as evidenced by the RSI, however, the fall has been more vicious and looks like a correction, rather than a mere pullback.


The seesaw in the U.S. Presidential election polls is affecting the dollar.

“There is some anticipation that the markets have built in a Hillary victory and that a Trump victory is going to roil the markets,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago, reports Reuters.

However, after recent reports of the FBI reviewing of more emails in its investigations of Hillary Clinton a few polls are now showing Mr. Donald Trump ahead in the polls.  The markets have started to realize that both the candidates have an equal opportunity to win.

Will A Trump win quash any hopes of a December rate hike?

Mr.Donald Trump has long been critical of FED Chair Janet Yellen. He has also spoken against the rates being artificially kept low to benefit Wall Street.

“It’s staying at zero because she’s obviously political and she’s doing what Obama wants her to do. And I know that’s not supposed to be the way it is, but that’s why it’s low,” Trump said during an interview with CNBC back in September, reports USA News.

Hence, most believe that a Trump win will force the FED to push back their plans of a rate hike in December of 2016.

“The uncertainty over the election is certainly weighing on the dollar,” said Stephen Casey, senior foreign exchange trader at Cambridge Global Payments in New York, reports Reuters.

Yellen in support of running a “high pressure” economy.

The FED projected four rate hikes in 2017 after the first rate hike in December 2016. Following the China scare and the Brexit uncertainty in the early part of this year, the FED developed cold feet and they brought down the expectations of rate hikes from four to two.

Since then, the members of the Central Bank have been jawboning the dollar. Though there were three dissenters in the last meeting, the permanent members are of the opinion that the economy should be given more time.

In a recent speech,  Dr. Janet Yellen said she might be open to “temporarily running a ‘high-pressure economy'” to help heal the damages caused due to the anemic recovery. “High pressure”, implies to allowing inflation to rise above the FED’s target of 2% to 3%. This can be possible only if  Dr. Yellen does not do a rate hike at all in the near future.

What does the technical picture of the dollar forecast?

The dollar has a history of making double tops, as marked by the circles in the chart (below). Every major double top formation has led to a slide in the dollar. Presently, the dollar has again formed a double top, along with a false breakout. A fake out leads to a sharp fall, as being seen in the dollar currently.

The ADX reading shows hysteric buying of the dollar, which is coming to an end. Similarly, the Stochastics are showing a trend change. So, what do we do to benefit from this fall in the dollar index?

 

Buy inverse ETF “UDN”.

The chart (below) shows that the ETF has been trading in a range since March of last year. The last two times this  ETF had come to the lower end of the range, it showed a sharp pullback, which carried it towards the highs. Currently, the ETF is rising from the support levels and a rally to the highs of $22.62 cannot be ruled out in the medium-term.

The current rally will face resistances at the three trendlines as seen on the chart (below).. There is a trade in UDN for both the short-term and the medium-term trader!.

The Bottom Line:

I have been warning my readers all throughout the year that the FED will not employ a rate hike and I have been proven correct, now, I am again going to forecast a Q.E.5 sometime in 2017. I have been among only a couple analysts who has gone against the crown and has been proven correct!

The stock markets are at a critical juncture, as is the dollar and gold. The different markets are not following the traditional rules of trade. The globe has changed with the ultra-loose monetary policy of the Central Banks. Hence, a deep understanding of economics and trading is needed to catch the next move up or down.

If you also want to benefit from my timely calls, please subscribe to my trading newsletter services at www.TheGoldAndOilGuy.com

Chris Vermeulen – www.TheGoldAndOilGuy.com

Chris Vermeulen is Founder of the popular trading site TheGoldAndOilGuy.com.  There he shares his highly successful, low-risk trading method.  For 7 years Chris has been a leader in teaching others to skillfully trade in gold, oil, and silver in both bull and bear markets.  Subscribers to his service depend on Chris' uniquely consistent investment opportunities that carry exceptionally low risk and high return.

Disclaimer: Nothing in this report should be construed as a solicitation to buy or sell any securities mentioned. Technical Traders Ltd., its owners and the author of this report are not registered broker-dealers or financial advisors. Before investing in any securities, you should consult with your financial advisor and a registered broker-dealer. Never make an investment based solely on what you read in an online or printed report, including this report, especially if the investment involves a small, thinly-traded company that isn’t well known. Technical Traders Ltd. and the author of this report has been paid by Cardiff Energy Corp. In addition, the author owns shares of Cardiff Energy Corp. and would also benefit from volume and price appreciation of its stock. The information provided here within should not be construed as a financial analysis but rather as an advertisement. The author’s views and opinions regarding the companies featured in reports are his own views and are based on information that he has researched independently and has received, which the author assumes to be reliable. Technical Traders Ltd. and the author of this report do not guarantee the accuracy, completeness, or usefulness of any content of this report, nor its fitness for any particular purpose. Lastly, the author does not guarantee that any of the companies mentioned in the reports will perform as expected, and any comparisons made to other companies may not be valid or come into effect.

Chris Vermeulen Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules