Dollar, EURUSD, Gold and USDJPY outlooks

Dollar, EURUSD, Gold and USDJPY outlooks

Posted on Monday, March 20 2017 at 8:33 pm GMT+0000

USD: remains weak even after the rate hike

The recent rate hike was widely expected by the markets. Specially suggested through Federal Committee members speeches earlier this month, and also supported by the strong job data. Looking to the monetary policy, the outlook remains cautiously positive, as nine FOMC members are expecting 2 rate hikes for the total of the year, while others are expecting a pace of three hikes. However, this might vary in view of the economic developments.

The dollar’s failure to rise after job data and rate hikes confirmed that those data were fully priced. Thus, the dollar needs new stimulus to continue heading higher, such as new Trump regulations Trump or the application of promised fiscal stimulus and tax relief. Otherwise, we might see large dollar sell-offs against commodity currencies (Canadian and Australian dollar), and safe haven like gold. So I expect the dollar to remain weak, until any new stimulus or any economic data outweighs expectations.

Euro: testing five-weeks high.

The euro continued its rally today, and remained close to the five-week high supported by the broadly weak dollar after the not so hawkish Fed on Wednesday.

The single currency received an added boost of positive outcome of the Dutch elections. And was also backed by the improved European economic data. The European Central Committee member Nowotny  indicated that the ECB could increase interest rates first, followed by a tapering of asset purchases.

The long term technical outlook is still bearish, where a close above 1.082 is needed to cancel the bearish scenario. Any decline below 1.0725 could pave the way for the 1.060 level.

Gold: continued its post-FOMC gains.

Gold also benefited from the broadly weak dollar. Recent developments led to large dollar sell-off shifting most investments towards safe haven such as the gold and the yen.

Following the weekend political developments between the US and Korea, and economically where the G20 failed to reach a free trade agreement, the gold continued its rise offsetting last week’s levels.

The gold completed Bullish reversal signs above 1211 and rallied in an attempt to test the 1263 level, any break above this level could push the metal towards 1350 in the coming months.

USD / JPY: bearish in the short term.

The yen rose to a four-week high against the dollar. The USD / JPY is currently testing a very significant support area at 111.60, any break below that area will pave the way towards 109.30 and then 108.00. It should be noted that failure of the pair to break below that barrier, would favor the dollar.