Trump’s presidential triumph may be the best event that has happened to the Dollar Index this year which currently hovers around 11 month highs at 100.35 as of this writing. The surprise victory swiftly heightened expectations of a U.S. rate hike in December, while boosting optimism towards an improvement in domestic economic growth under Trump’s administration. Economic data from the United States this month has repeatedly pointed to economic stability, with October’s firm retail sales figure of 0.8% reinforcing expectations of a rate increase in the coming month. The bullish sentiment towards the dollar could be reaching its highest levels in 2016 and should encourage dollar bullish investors to install heavy rounds of buying moving forward. Investors may direct their attention towards the pending PPI report, which if it ticks higher should complement the dollar’s appreciation.
From a technical standpoint, the Dollar Index is extremely bullish on the daily timeframe as prices are trading above both the 20 and 200 SMA. Previous resistance around 100.00 could transform into a dynamic support which encourages an up move towards 100.50.
Gold still under pressure
Gold experienced a painful selloff last Friday, with prices crashing towards $1210 this week as the bearish combination of rising U.S. rate hike expectations and dollar strength encouraged sellers to attack ruthlessly. This zero-yielding metal has lost some of its safe-haven allure amid the risk-on cycle with steeper declines pending as the lingering Trump effect repels investor attraction further. The decisive weekly close below $1250 was the required signal sellers needed to reinforce their bearish bias towards gold. From a technical standpoint, prices are trading below the daily 20 SMA while the MACD has also crossed to the downside. Previous support around $1250 could transform into a dynamic resistance, which triggers depreciation back towards $1200. A strong breakdown below $1210 could also open a path towards $1200.
Currency spotlight – USDJPY
The USDJPY rallied to five month highs around 109.60 during trading on Tuesday with the dollar’s appreciation amid the rising U.S. rate hike expectations acting as the engine. This pair is heavily bullish on the daily timeframe with further inclines expected as the explosive mixture of yen weakness and dollar strength entices buyers to load positions. A solid breakout and daily close above 109.50 could spark a further upsurge towards 111.00.