The USD Price Outlook: US Dollar Tests Support as EUR, GBP, CAD Spike as Dollar Dips Despite EUR/USD Hike? Could You Be Missing the Main Rally? Does the downward spiral of the Dollar explain why the EUR/USD has risen? Is it purely a coincidence that the Dollar and the USD are spiking at the same time? Is it due to the fact that the dollar has been declining against all currencies and this is fueling the rally?
I don’t think so. While I believe that the Dollar’s negative influences can be seen in many different ways, one of the most obvious is the opposite. The EUR/USD has held pretty steady since the beginning of the year and even strengthened a bit recently.
If the USD was falling, would the EUR/USD have spiked and moved higher? I believe so, especially with a downside surprise coming. It seems strange that everyone is getting into the market except me.
In the past, I’ve pointed out the bearish signs pointing to the Dollar’s strength. I know you will agree, and you’re right, I’m no longer buying shares of companies that I expect to decline in value. You can’t always pick stocks that are going to drop.
I’m not sure about you, but if I’m trading the currency pair and I know the USD is going to get weaker, I’ll just stay away from it. I used to find many options in European equities, but I now keep my attention on the US Dollar as well.
I know what you’re going to say to me; it’s just coincidence that the EUR/USD is doing well, isn’t it? And here’s another point I want to make to you; you could be right, I could be wrong, but it doesn’t mean I’m right either.
That’s one of the biggest reasons that I don’t trust the Dollar’s strength. It’s not necessarily going to break down, it’s going to strengthen, so there is no basis for trading it. There’s also the caveat that the US economy will eventually rebound and we won’t be at such a disadvantage when that happens.
Here’s another point to consider, the USD may be holding tight because it wants to hold on to its major investors. Most of the US dollar’s support is still being taken by large investors. They might finally decide to pull back now that the USD has broken through the resistance, and then the USD could tumble.
Those who control big businesses are likely keeping their money invested, too. Think about this: The Small Business Administration reports that small businesses are not very confident about their finances because they fear that government stimulus is going to make their financial situation worse.
Maybe the real reason that the Dollar is so strong is because there is a lot of cash in the banking sector, but this is something that is probably long-term. People are worried about what’s going to happen, and this is where the dollar is currently strong.
The Dollar istaking the profits of the big companies and squirreling them away as a hedge against inflation. The biggest reason why the dollar is up now is because people fear inflation and we’ll soon see that return. The movement in the Forex market has become predictable, and this is what has happened to the USD Price Outlook.