The Dollar index is very complicated to understand and predict when you analyses the individual factors that play into the various parts and therefore the index as a whole.
The consensus if for the Dollar to weaken and there's great arguments to support this widely held theory.
58% of the Dollar index consists of the Euro. It's therefore important to try to understand the Euro and Eurozone macro economics. The Eurozone appears to be deflationary, at least against that of the US. US inflation is bound to spike at some point, leaving the inflation differential between the US and the Eurozone at a meaningful figure. According to Alpine Macro, a deflationary environment doesn't lead to a weakening of the respective currency despite a poor economic back drop. A deflationary environment leads to an appreciation in the currency which is deflationary against its inflationary trading partners. Could this all lead to a weakening of the dollar index.
But what about the contrarian view? I'm trying to wrap my head around the factors which could lead to a strengthening in the dollar.
Trading signals
The trading signals suggest that the dollar should weaken or retrace, perhaps towards the 97 mark on the weakly chart which has been indexed to 100. Thereafter, perhaps a strengthening trend could follow? The inverse relationship between the dollar and the Euro is clearly evident in the chart. If this trend were to follow through, the dollar index could reach levels around the 95 - 97 mark.
Please like and follow for daily posts on various asset classes. Please also share your views on the trading ideas and whether or not you find them to be of any value to you as a trader.
Please note, this idea is shared for educational and discussion purposes only and should not result in speculative investment decisions in any asset class.
The consensus if for the Dollar to weaken and there's great arguments to support this widely held theory.
58% of the Dollar index consists of the Euro. It's therefore important to try to understand the Euro and Eurozone macro economics. The Eurozone appears to be deflationary, at least against that of the US. US inflation is bound to spike at some point, leaving the inflation differential between the US and the Eurozone at a meaningful figure. According to Alpine Macro, a deflationary environment doesn't lead to a weakening of the respective currency despite a poor economic back drop. A deflationary environment leads to an appreciation in the currency which is deflationary against its inflationary trading partners. Could this all lead to a weakening of the dollar index.
But what about the contrarian view? I'm trying to wrap my head around the factors which could lead to a strengthening in the dollar.
Trading signals
The trading signals suggest that the dollar should weaken or retrace, perhaps towards the 97 mark on the weakly chart which has been indexed to 100. Thereafter, perhaps a strengthening trend could follow? The inverse relationship between the dollar and the Euro is clearly evident in the chart. If this trend were to follow through, the dollar index could reach levels around the 95 - 97 mark.
Please like and follow for daily posts on various asset classes. Please also share your views on the trading ideas and whether or not you find them to be of any value to you as a trader.
Please note, this idea is shared for educational and discussion purposes only and should not result in speculative investment decisions in any asset class.
