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Free Forex Trading Signals -USDX December 2016

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 the 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 on March 2017.

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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)

Our indicator (TCI) indicates that the USDX can grow furthermore, after a short-term price consolidation.

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 ↓).

Table: TCI on USDX

 

Date High Low Close Change (%) Volatility (%) TCI
2016.11.08 97.97000 97.55000 97.85000 0.09% 0.4% 1.10%
2016.11.09 98.68000 95.89000 98.63000 0.80% 2.9% 3.31%
2016.11.10 99.07000 98.31000 98.77000 0.14% 0.8% 3.46%
2016.11.11 99.12000 98.53000 98.95000 0.18% 0.6% 4.19%
2016.11.14 100.22000 99.36000 99.99000 1.05% 0.9% 5.15%
2016.11.15 100.27000 99.46000 100.19000 0.20% 0.8% 5.77%
2016.11.16 100.58000 99.90000 100.38000 0.19% 0.7% 5.88%
2016.11.17 101.00000 99.97000 100.97000 0.59% 1.0% 6.99%
2016.11.18 101.53000 100.88000 101.40000 0.43% 0.6% 7.41%
2016.11.21 101.43000 100.80000 100.93000 -0.46% 0.6% 5.85%
2016.11.22 101.36000 100.70000 101.07000 0.14% 0.7% 5.95%
2016.11.23 101.94000 100.94000 101.74000 0.66% 1.0% 6.74%
2016.11.24 102.10000 101.51000 101.74000 0.00% 0.6% 6.41%
2016.11.25 101.96000 101.24000 101.48000 -0.26% 0.7% 5.38%
2016.11.28 (MID-DAY) 101.23000 100.66000 101.21000 -0.27% 0.6% 4.82%
(+1 Trading Day)           4.51%
(+2 Trading Days)           4.71%
(+3 Trading Days)           4.39%
(+4 Trading Days)           4.56%
(+5 Trading Days)           4.54%
(+6 Trading Days)           4.11%
(+7 Trading Days)           3.73%
(+8 Trading Days)           3.13%
(+9 Trading Days)           3.05%
(+10 Trading Days)           2.87%
(+11 Trading Days)           2.61%
(+12 Trading Days)           2.34%
(+13 Trading Days)           2.59%
(+14 Trading Days)           2.41%
(+15 Trading Days)           2.59%

 

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 "relatively 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.

This is what we have learned from the US elections of 2016.

The Case Study of the 2016 American Elections

According to most political analysts, Mrs. Clinton should win the American Elections of 2016. The bookmakers offered bets x1.2 for Mrs. Clinton and x5.0 for Mr. Trump. In other words, they gave an 80% probability for Mr. Clinton to win the elections, and a 20% for Mr. Trump. Of course once more forecasting the public opinion proved a very difficult task.

Market Anticipations versus Hard Fundamentals

-Most currency analysts forecasted that if Mr. Trump gets elected the US Dollar will tank

-But in reality, Mr. Trump wanted and supported a hard currency policy for the US Dollar

-Most stock market analysts forecasted that if Mr. Trump gets elected the US Stock Markets will tank too

-But in reality, Mr. Trump wanted to cut corporate tax and that means higher profits and higher dividends to the shareholders

In overall, there was a huge divergence between the market anticipations and hard fundamentals.

What Happened Next

In the next few hours after the election of Mr. Trump, the US markets indeed tanked. This was due to the market psychology and the fear of the unknown.

After a few days of the election, the US stock markets and the US Dollar soared and reached new record highs. That is because hard fundamentals prevailed. Hard fundamentals always prevail at the end.

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)

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