Spot Forex Market – Overview
Looking back over the past 3 months since my previous overview (see June 7th, 2016) we saw that the Dow Jones FXCM Dollar Index (DJ FXCM Dollar Index) re-tested the critical resistance price level at 12 001 (high = 12 006) on June 24th, 2016 (see horizontal red line).
The Index got final resistance at 12 121 WHEREAFTER it started to nose-dive south (dollar weakness). Our expectation over the longer term remains bearish for the US Dollar by looking at related currency pairs such as UsdJpy & UsdCad. The latter 2 currencies sold off significantly over the past 3 months and I feel this confirms my view.
Where to next for the US Dollar? From a purely technical point of view, IF the index can fall through the support level at the low of Aug 19th, 2016 (low = 11 848) THEN we may possibly see the Index targeting the price areas around 11 585 (see green horizontal line at bottom of graph). The latter price seems far away to the south but a break through the 11 848 low is all that is needed to open the way for more US Dollar weakness.
One of the primary factors that drives the Forex Market are the interest rates. We saw over the past year(s) that the United States is slow to raise interest rates given that inflation is less than 2%. Even with all the money (raised by Quantitive Easing since 2008) at a public level, the Fed could not succeed to jump-start inflation. So my humble opinion is that money will not necessarily flow into the States as long as inflation remains low (less than 2%) which will put the US economy under pressure facing a weaker dollar in the future.
Johann has been trading Forex for over a decade. He has managed offshore accounts for a local firm out of Salt Lake City in the USA, as well as trading on his own account in his private capacity. He got his first taste of the markets through Share Direct and after finding great success in his career he has returned to train others in the art of trading.
Johann also trades CFD’s, indices and local equities but it is really more of a hobby to him.