Dollar bulls facing extreme level of uncertainty as U.S economy struggles

There has been a massive level of uncertainty in the global market regarding the U.S third interest hike decision for the year 2017. FED chairperson Janet Yellen had projected three rate hikes prior to the closing of the year 2016 and two rate hikes have already been administered by the FED officials. But the performance of the U.S dollar in the global market is pretty weak and the optimistic dollar bulls are in doubt in regard to the long-term effect of the U.S interest rate hike decision. Although the FED officials have hiked their interest rate two times already, some of the leading economists are considering it as a premature rate hike, which is most likely to have strong negative impact on the green bucks’ strength. Some of the leading investors are already thinking that the FED is done with their rate hike program for the year 2017 since the U.S economy is struggling pretty hard under the new administration of Mr. Trump. The strong level of negative consumer sentiment due to the wrong commitment regarding the increase of fiscal spending is also pushing the dollar lower against most of its major rivals in the financial industry.

The new U.S administration

The current sentiment of the U.S consumer has been extremely negative due to the delay of Mr. Trump’s effort in regard to the health care issue. The U.S dollar index, which is the overall value of the green bucks’ strength, has been under extreme level bearish pressure for the last 6 months, and currently trades near the 94.47 market. The current drawdown in the U.S dollar index is near about 7% and some of the leading investors are expecting a sharp decline in the short-term future, as there are no significant improvements in the major sectors of the U.S economy. On the contrary, the recent rate hike by the FED is now imposing a great threat to the U.S economy, as the U.S inflation data came out extremely weak. Most of the leading researchers are now thinking that the surge in the U.S dollar index towards the 14-year record high after the November election was the result of the overreaction of the global investors. Despite such bearish threat in the U.S economy, the optimistic dollar bulls are still expecting a strong turnaround from the dollar bulls, as Mr. Trump’s administration is totally uncertain. In the upcoming week, we have an unemployment data release and the majority of the investors are cautiously waiting for it. A strong positive data release will boost the dollar index in the global market. On the contrary, if the data turns out to be negative, we will see a decent drop in the U.S dollar strength which is most likely to prevail rest of this month.

Currency market overview

Most of the major rivals in the global market are doing significantly well against the green bucks due to the recent performance of the U.S economy. The low yielding Japanese Yen has been pushing the dollar lower in the global market and it traded at 111.70. However, the extensive bullish rally of the EURUSD pair has been halted to a certain extent after it hit the critical resistance level at 1.15750. The GBPUSD pair also traded lower and incurred a loss of 0.1% despite the recent weakness of the green bucks’ strength. On the contrary, the Aussie dollar has been trading higher for eight consecutive weeks and there is no sign of bearish reversal. All the investors are in fear to buy dollars at the current market conditions, as the FED officials might not go for another rate hike program this year. Though the whole financial market is suffering from an extreme level of uncertainty, this week is going to play a vital role for the traders. On Thursday we have the ECB press conference and all the leading investors will be looking for a clear clue from ECB president Mario Draghi. Followed by the ECB press conference we have the U.S unemployment claims data release and this also going to give the traders a clear clue about the market’s next move. Considering the overall fundamental factors of the green bucks, we are not in a position to open a new position in favor or against the green bucks. We need to stay on the sidelines and wait for a clear clue regarding the market next movement.

Summary:

The year 2017 has been very rough for the professional traders as the market movement is totally unclear due to political instability in the U.S. economy. Most of the leading investors were expecting a stronger dollar from the very beginning of the year 2017 as Mr. Trump’s victory boosted the U.S dollar index to a 14-year record high. On the contrary, the FED officials have also declared that they are going to hike their interest rate for three consecutive times. But things have changed a lot as a consequence of the recent weak performance in the U.S economy. The FED is most likely to be pressurized by the U.S. central bank for another rate hike decision, since they need adjust their balance sheet at the end of the year 2017. But considering the current performance, another rate hike from the FED might create an extreme level of negative consumer sentiment. Though more jobs have been added to the U.S. economy in the year 2017, the average hourly income is still not up to par. However, we might see a strong turnaround from the U.S. dollar in the upcoming days, as Mr. Trump’s administration is totally unpredictable.