Free Forex Trading Signals: USDX May/June 2018

■ Market: Foreign Exchange

■ Asset: USDX (US Dollar Index)

Economic growth continues despite political instability, stock market volatility, rising tensions in the Middle East, and climbing oil prices—creating one of the most complex and controversial macroeconomic environments in recent years.

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Macroeconomic Outlook

The economy is growing on both sides of the Atlantic, but political instability in the U.S., conflict in the Middle East, rising bond yields, and the surge in oil prices are making investors uneasy. This is the kind of environment that fuels extreme volatility in global money and capital markets.

At a glance, here’s the current macroeconomic outlook for the U.S. and the Eurozone:

US Inflation and FED Interest Rate Hikes in 2018

In its recent meeting, the FED kept interest rates unchanged and confirmed that inflation is now close to its 2.0% target. According to the FED, inflation over the next 12 months is expected to “run near” this target. The next rate hike is expected in June 2018. Overall, three (3) more hikes are likely in 2018. The current target rate is 150–175 bps. Here’s the basic forecast for the rest 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 the Eurozone was 1.2%, still below the ECB’s 2.0% target. The Eurozone ended 2017 with its strongest growth in nearly seven years, but growth has slowed in 2018. In Q1, the economy grew by 0.4%, compared to 0.7% in the previous quarter. On a yearly basis, growth reached 2.5%. Even so, the Eurozone is still outperforming the UK, which grew just 0.1% in Q1 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 mid-April, the US Dollar has performed impressively over the past few weeks. The USDΧ rose from 88.90 in mid-April to 93.20 in early May.

Chart: The US Dollar Index (Daily)

USDX currently trades at 92.75. 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 between 91.00 and 95.00 over the next few weeks.

2. If the USDX breaks above 95.05, it could rise further—potentially reaching 97.00 or even 100.00 during the summer of 2018.

3. If the USDX drops below the 90.90–91.05 range, it will likely test the support zone between 88.30 and 88.50.

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

 

■ Free Forex Trading Signals: USDX May/June 2018

TradingCenter (May, 10th 2018)