Where Does The USD Go From Here?

Wednesday’s FED announcement brought heightened volatilities and some life to the greenback. After weeks of getting slammed against the euro, Canadian dollar and Swiss franc, day traders took Yellen’s commentary as a reason to rally the buck.

Kudos to all whom turned the volatility in their favor and took a few pips out of the market!

Where does the USD go from here?

For the long-term, it is a cloudy picture. The U.S. tax question, pending governmental shutdown and hints at a coming rate hike courtesy of the FED certainly muddy the waters. At least a look at the December U.S. dollar index futures contract gives us an idea of where the USD may be going.

December U.S. Dollar Index Futures, Daily Chart

Engaging dollar index futures isn’t a favorite pastime of mine. I find that trading the forex majors through a reputable broker brings more value to the table. But, the dollar index can be instructive in identifying long-term trends.

One look at the daily chart illustrates the USD’s weakness over the past few months. Nevertheless, the December dollar has a few interesting aspects:

• A pending MP/SMA crossover signals a change in sentiment.

• Trade is currently above the 13 day SMA, 20 Day EMA and Bollinger MP.

• Pricing is still far below the 38% retracement level of the macro downtrend.

Bottom Line: Yesterday’s rally is far from a game changer. Until we see a reasonable recovery of December dollar futures, I am inclined to hold a bearish outlook towards the USD as we roll to the end of 2017.

Of course, everything can change. The FED can tighten, Trump and Congress can cut a tax deal, or we can see a mass exodus from the commodity markets. No matter the scenario, stay tuned to FX Leaders for signals and ideas of how to properly trade the action.