The Fed Finally Hiked Rates. Now what do we Watch for the Dollar?
Fundamental Forecast for the US Dollar: Bullish
Fundamental Forecast for the Australian Dollar: Neutral
- Australian Dollar Lacking for Discrete Drivers After Fed Rate Hike
- Thin Liquidity in Pre-Holiday Trade May Amplify Knee-Jerk Volatility
- Find Key Turning Points for the Australian Dollar with DailyFX SSI
The Australian Dollar faced selling pressure last week as expected, with prices dropping to their lowest in a month against the greenback. The Aussie’s slump was matched by a drop in share prices as risk sentiment soured in the days following the FOMC monetary policy announcement, where Chair Yellen and company issued the first post-QE increase in the benchmark lending rate. The S&P 500 – a benchmark for global risk appetite – ended the week with the weakest close since mid-October.
Fundamental Forecast for CAD: Bearish
- Canada’s Dollar Touched 12-yr lows As Economic Worries Mount UponEnergy Markets & China Concerns That Could Push the BoC to Cut Rates
- Canadian Dollar Down Heavy on the Week As Highly Correlated WTI Crude Oil Trades to November 2003 Low on Iran Supply Coming To Market
- Canadian Dollar Likely to Hit Fresh Lows per the Speculative Sentiment Index
A Bank of Canada rate cut is now the preferred bet as the Loonie seems in near free-fall. Against the JPY, the Canadian Dollar is off over 8% and is among the weakest currencies within the G10 as Chinese economic data continues to discourage risk sentiment and oversupply in Oil continues to push down the price of Oil to 12-year lows. All of this pressure amounts toward the Bank of Canada potentially easing again like they did last January.
Fundamental Forecast for USDOLLAR Index: Neutral
– Risk sentiment continues to deteriorate broadly across asset classes, playing favorably into safe haven currencies’ hands, like the US Dollar.
Big moves out of China catalyzed big declines across global financial markets, and all eyes turn to Asian markets as they could set the pace for trading one again in the week ahead.
Fundamental Forecast for Gold: Bullish
- Gold Prices Forecast to Fall Even Further
- Gold Price 1130 Looms as a Test for Bull Move
- Sign up for DailyFX on Demand For Real-Time Gold Updates/Analysis Throughout the Week
Gold prices are sharply higher this week with the precious metal rallying nearly 3.9% to trade at 1102 ahead of the New York close on Friday. The gains come amid a tumultuous week for markets with the Dow Jones Index falling more than 5% during the first week of January, marking the weakest yearly start since at least 1896.
Fundamental Forecast for the Kiwi:Bearish
- New Zealand Dollar Ends Last Week With Strongest Rise Vs. USD in 3-Months
- Weak CPI on Less Global Demand Keeps RBNZ Ripe for a Rate Cute This Week
- For up-to-date and real-time analysis on the Kiwi and market reactions to economic factors currently ‘in the air,’ DailyFX on Demand can help.
Risk markets are no longer staring at the abyss as they were at the beginning of last week, which is benefitting markets like equities, Oil, & the New Zealand Dollar. From the start of the year, the New Zealand Dollar has been on its back foot as traders were quick to look at the slack of high-interest rates that the RBNZ could cutto get the economy running smoothly again. The apex of this ‘sell the kiwi against anything,’ move was after the disappointing CPI print on the 19th.
Fundamental Forecast for EUR/USD: Neutral
– Retail traders remain on the opposite side of the recent trend in EUR/USD.
A sharp slide in capital markets reflected a strong ‘risk off’ mentality into the close of this past week. Will cooler heads prevail ahead or was that the next move to escalate a bigger shift in sentiment?