Free Forex Trading Signals: USDX May/June 2018

■ Market: Foreign Exchange

■ Asset: USDX (US Dollar Index)

Economic growth despite political instability, stockmarket volatility, flags of war in the Middle East, and a growing oil price create one of the most complex and controversial macroeconomic environments of recent years.

Macroeconomic Outlook

The economy is growing on both sides of the Atlantic but the political instability in the US, the turmoil in the Middle East, the rising bond yields, and the rising price of the ‘black gold’ make investors feel very nervous. This is the perfect environment for extreme volatility in global money and capital markets.

At a glance, this is the current macroeconomic outlook for the US and Eurozone.

• US Inflation and FED Interest Rate Hikes in 2018

In its recent meeting, FED decided to hold interest rates and confirmed that inflation has risen to almost meet its target. According to FED, inflation over the next 12 months should "run near" the 2.0% target. The next interest rate hike is expected in June 2018. In total, we should expect three (3) more interest hikes in 2018. Currently, the target rate is 150-175 bps, this is the basic forecast for the remaining of the year:

□ June (13th) Meeting → 175-200 bps (Hike)

□ August (1st) Meeting → No Hike

□ September (28th) Meeting → 200-225 bps (Hike)

□ November (8th) Meeting → No Hike

□ December (19th) Meeting → 200-250 bps (Probable Hike)

• Eurozone’s Inflation and Growth Rate

In April, inflation in Eurozone was 1.2% remaining below the European Central Bank's 2.0% target. Eurozone ended 2017 with the strongest growth rate in almost seven years, but in 2018 the euro economy seems to grow slower. In the first quarter of 2018, growth slowed to 0.4%, compared with 0.7% in the previous quarter. In a yearly basis, the growth reached 2.5%. Nevertheless, Eurozone is still doing much better than the UK, which only grew by 0.1% in the first quarter of 2018. "This was the fifth out of seven consecutive quarters that the euro zone grew faster than the UK following the EU referendum," said Barret Kupelian of PricewaterhouseCoopers.

 

USDX Technical Analysis

Starting in middle April, the US Dollar performed amazingly during the past couple of weeks. The USDΧ grew from 88.90 (middle April) to 93.20 in early May.

Chart: The US Dollar Index (Daily)

USDX trades currently at 92.75 and these are some key support/resistance levels for the next few weeks:

• □ Short-Term Resistance/Supply Levels

(↑) 93.20 (recent high)

(↑) 94.03-94.05

(↑) 94.95-95.05 (VERY IMPORTANT)

(↑) 96.20-96.25

(↑) 97.45-97.65

• □ Short Term Support/Demand Levels

(↓) 92.35-92.40

(↓) 90.90-91.05 (IMPORTANT)

(↓) 90.40-90.45

(↓) 88.90-89.15

(↓) 88.30-88.50 (IMPORTANT)

Observations

1. The US Dollar Index is expected to trade within the range 91.00-95.00 for the next few weeks

2. If the USDX manages to cross over 95.05 then it may grow up to 97.00 and even to 100.00 during the summer of 2018

3. If the USDX moves below 90.90-91.05 then it will probably test the support area of 88.30-88.50

As mentioned at the beginning of this analysis, this is one of the most complex and controversial macroeconomic environments of recent years. Therefore, it is not wise to make further forecasts.

 

■ Free Forex Trading Signals: USDX May/June 2018

TradingCenter (May, 10th 2018)