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US Dollar 2016-12-22

US Dollar


Exciting times await as the US Dollar rallied into 14-year highs as US Treasury yields rallied and the Dow Jones hit all-time highs following the most recent Fed DotPlot that charted a three-quarter rate hike during 2017, supported by evidence of Economic recovery accelerating in the US amidst strong GDP growth in the last quarter of 2016, strong job creation with unemployment dropping to a low of 4.6% and the outlook that Trumpenomics is about to spur on inflation when Trump takes office.

Slipping by unnoticedly however is weak wage growth and bearish momentum in consumer spending habits and capacity utilization which will likely dampen the outlook from a three-quarter rate hike to a two-quarter rate hike during 2017, and as result the premium US Dollar stands to be corrected by at least 200 points as the market starts realizing the over pricing of the US Dollar. This is not the only risk factor when it comes to the pricing of the US Dollar to watch as free trade agreement withdrawal, new presidents in office and a trade war with China will likely send the US Dollar back down to the 11,800 level during 2017 and perhaps even lower pending developments in the Eurozone.

The key levels to watch out for in the immediate future are 12,500 on the correction from the recent high followed by another test of 12,600 as the market will rush to push the Dow Jones above the 20,000 level followed by a deep retracement when Trump takes office on the 20th of January. 



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