Free Forex Trading Signals: The US Dollar Index (USDX) December 2016

■ Market: Foreign Exchange

■ Asset: US Dollar Index (USDX)

Forex Market Outlook

The global markets are still feeling the vibrations of Trump’s victory. The Fx market volatility of the past couple of weeks has been enormous. The US Dollar grew stronger and the USDX (US Dollar index) reached a 13.5 year high. A great USD movement took place against the Japanese Yen (USDJPY). Probably, the Bank of Japan is preparing a long-term devalued Yen in order to fight back the new Trump’s foreign trade policies. The Euro is also in trouble, towards the rise of the ‘right-wing extremism’ in all around the world. In this dynamic environment, FED is expected to raise the US rates while ECB is not clear about how much it will extend its massive asset purchases program (QE), which ends in March 2017.

TradingCenter's TCI on USDX

During the past couple of weeks, the US Dollar Index (USDX) has grown considerably, as you can see in the following chart. In the lower chart, you can see the TCI for the same period. TCI indicates that the USDX can grow furthermore, after a short-term price consolidation. Below you can check the TCI reading for the past 15 trading days and its forecast regarding the upcoming 15 trading days.

Chart: USDX 2012-2016 (upper chart) TCI (lower chart)

USDX Technical Analysis

□ Short-Term Supply Level: 106.9 – 107.1

□ Short-Term Demand Level: 100.00 – 100.50

The TradingCenter Indicator (TCI) is a unique tool developed by TradingCenter.org: ►More About TCI

Here are current TCI Indications regarding USDX (PRESS THE SLIDER BELOW ↓).

Decoding Mr. Trump’s Economic Proposals

These are the key Trump’s economic policy proposals:

□ Higher tariffs on global trade (4-10% tariffs on imports from China and Mexico)
□ Hard-currency policy for the US Dollar
□ Corporate tax cut
□ Incentives for the domestic manufacturers
□ Income tax cuts
□ Increased federal stimulus to boost GDP
□ Incentives for the repatriation of overseas earnings
□ Doubling the infrastructure expenditure to $500 billion
□ Cutting social services and similar government expenses

This is what we should expect towards the next 12-18 months

About $600 billion are needed each year in the US only to offset the income and business tax cuts. The Tax Policy Center projects that unless Trump’s tax plan "is accompanied by very large spending cuts” it could increase dramatically the US national debt over the next decade.

The Forex markets anticipate that during Trump’s administration, the US dollar will grow stronger as interest rates will hike. Fed Chair Janet Yellen said that the US interest rates will be raised "really soon" if economic data keeps pointing to an improving labor market and rising inflation. Of course, Mr. Trump has categorized himself as a ‘low-interest rate person’, but we can’t estimate what is low and what NOT for Mr. Trump.

As concerns global trade and the economic globalization, Trump said in June 2016 “China’s entrance into the World Trade Organization has enabled the greatest jobs theft in history”. He also stated that “Our politicians have aggressively pursued a policy of globalization—moving our jobs, our wealth and our factories to Mexico and overseas”.

Lower imports to the US combined with a stronger USD will probably drive the global GDP lower. According to Goldman, the annual global growth is expected 0.1% lower. Note that the global growth was at +3.1% for 2015 and analysts consider growth under +2,0% a global recession.

 

Conclusions

The fundamental and the technical analysis of the US Dollar are strong. The key level for the USDX is about 100.00-100.50 points. If the USDX can hold these levels it will definitely continue its aggressive bullish movement against all majors.

From the other hand, the US Markets have grown very rapidly during November, without any sufficient correction. Most technical indicators suggest that the US Markets are found in clear overbought levels. In addition, December, based on statistics, is not a good month for the USD.

In overall, the wisest thing at this point is to wait. Wait for the confirmation or NOT of the 100.00-100.50 points before opening any long or short positions on USDX. Our indicator (TCI) indicates that the USDX can grow furthermore, after a short-term price consolidation.

 

■ Free Forex Trading Signals: USDX December 2016

George Protonotarios, Financial Analyst »George at Linkedin

TradingCenter, November, 28th (2016)