USD, Up Or Down? A Fundamental Look

Posted Tuesday, July 4, 2017 by
Skerdian Meta • 2 min read

As we´ve mentioned many times recently, the USD has been sliding down a slippery slope against risk currencies, specifically the Euro and the Pound. However, that may be about to change. 

There are a number of reasons for the slide. One of the main causes is the fact that the FED rate hike in June was already priced in and the current consensus is that the nearest rate hike will be in December.

That was correct until a few days ago. But, last Friday, the Chicago PMI made a huge jump. The Chicago PMI is considered a leading indicator for the economy, so according to textbooks of macroeconomics, the US economy is supposed to gain at a considerable pace in the months ahead.

Besides that, the construction PMI report jumped nearly 3 points yesterday. Employment and new orders also jumped considerably, placing this sector in a very good position, just like the manufacturing sector.

So according to these numbers, the US economy is heating up. The only figure still lagging is inflation and the report today showed that.

No one knows how inflation will play out in the US over the next few months.There are so many factors that affect inflation, such as oil prices, gas prices (remember the Qatar crisis), the global economy, globalized competition, the domestic consumer, wages, spending etc. that it can be a bit tricky to predict. One thing is for sure though, if the data keeps coming in like this and inflation somehow picks up, then the FED will increase the hawkish rhetoric.

If this does take place, then there´s nowhere for the Buck to go but up. The technical analysis supports this as well because the USD has been badly beaten up and a correction is long overdue.

With this analysis in mind, we opened a long term sell signal in AUD/USD which is already in profit. We hope that we see a retrace soon.  


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