14 trillion dollars up to their eye balls in debt and still the last 6 months has seen a voracious appetite for US debt and the subsequent demand for the USD. Finally the US looks to have shaken off the bad credit lingering since 2008 to set the stage for an important period of economic growth to reinforce it's image as the global power house to kick start the global economy form the clutches of recession.
Altogether there are 3 important factors which are currently driving this USD market towards the upside:
1.The USD with its growing economic stability is increasingly being seen as a safe haven for fixed income traders wanting to squeezen a yield from a low inflationary climate. Large scale hedge fund speculators are betting on an earlier than expected interest rate rise by the U.S. Federal Reserve this year. Even though Federal Reserve Chair Janet Yellen has been trying to talk down the U.S. bond market still the large scale specs are coming in droves, sensing the opportunity for a great bull run in the bond markets over the next few years. International investors are piling in to US treasuries and corporate debt driving up the demand for the US Dollar and consequently incresing pressure on the US Fed not to jerk the market that has only been recently rekindled to life with extreme care.
Please read here - http://www.bloomberg.com/news/2015-01-07/yellen-tells-bond-traders-not-to-pay-too-much-attention-to-oil.html
But there are other powerful factors also at play such as the overall Euro weakness and commodity price declines weighing in heavily on the US interest rate outlook and prospective signs of further US Dollar strength.
2. Euro land economic weakness cannot be more starkly contrasted to the growing sense of dynamism in the US markets. The European Central Bank will soon announce the exact details of its anticipated plan to implement a quantitative easing program. If the US could do it then so too can Europe; and so European legislators seem to think. Here we are 6 years after the global credit collapse and the EU still cannot shake its head from the credit hangover and provide enough liquidity to the Euro debt markets by an EU backed program of buying back member nations sovereign debt. This is exactly why the Euro is selling off more so because investors do not see any sense of leadership direction and coherent thoughtfulness about the method of the proposed quantitative easing program.
http://www.bloomberg.com/news/2015-01-07/euro-area-prices-seen-falling-as-risk-of-deflation-spiral-mounts.html
Contrasting US resoluteness with EU indecisiveness and thus we have a secondary basis for USD strength in 2015. US DX is already approaching its primary upside target on the monthly chart, being the June 2010 top of 94.12 and once breached there is an overall sense of massive spec momentum to take the US DX to 100. There is all the technical and fundamental reason to suggest that the coming upside USD momentum will be considerable and sustained.
3. In the wake of the collapse in energy prices -
Please read - http://www.bloomberg.com/news/2015-01-07/oil-at-40-means-boon-for-some-no-ice-cream-for-others.html?alcmpid=
CL is anticipated to trade within an expected trading range of 45-60 for the rest of the year 2015, or to be more technical, through a resistance band at the 10-day moving average crossing at 52.80, and 20-day moving average crossing at 55.37, and a support band at 46.83 with further secondary support at the 43.77 mark.
Weaker energy prices for 2015 should add on at least 0.8% to the US GDP forecast for 2015. Thus spurring large spec players into the USD asset classes and already given conclusion that the USD should be ready to push through the 94.32 and consolidate before April this year.
Pieter Bergli - DeLoren Trust Holdings
Forex education for all
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