Good day forex traders.
Time flies and the new year is upon us. There were many challenging moments in 2016 and I hope you made money.
A number of my readers continued to wonder why is the US dollar gaining in strength. The enormous amount of debt together with the unexpected US election results brought them many doubts.
Looking at the EUR/USD weekly chart above, we note that the currency pair ended the year lower. It is now at the region of 1.05. It was testing 1.04 and briefly went below it. This suggests a bearish pressure.
From a fundamental point of view, despite the various doubts such as debt, we must remember that the US remains an optimistic economy versus the likes of others such as Britian with it’s Brexit challenge or the diversity of economic performance in the Euro Zone. Traders like cohesion and stability.
While the US Non-Farm Payroll can be higher, it has nonetheless shown resilience in the years after the 2008 crisis. With the return of some inflation pressure, the US Federal Reserve began the tightening phase of the monetary policy. The increased interest rate elevated the attractiveness of the US Dollar. The anticipation of more hikes compounds the demand.
With the election of Donald Trump as the next US president, many investors were apprehensive at first. Having said so, the US dollar gained in value and this may be due to the perceived protectionism style of the President Elect.
The pace of interest rate hikes and the policies of the new president are likely to be major influencers of the US dollar and hence by extension the EUR/USD in 2017.
Happy New Year and trade safely as usual.