Will 2015 be the Year of the Greenback?
Today’s Spotlight Market
Large speculators are becoming more bullish on the U.S. Dollar Index according to the most recent Commitment of Traders report. Non-commercial traders are currently net-long 47,447 contracts for the reporting period ending December 23rd. However, during that same reporting period, the net-long position increased by a whopping 15,888 contracts. This appears to show that trend-following traders are adding to their positions, as the market moved to highs not seen in nearly 10 years.
Fundamentals
Traders who were long the U.S. Dollar (USD) had a terrific New Year, as the greenback soared to 4 ? year highs vs. the Euro (EUR) and, in fact, posted gains against a group of 16 major currencies at the end of 2014. The USD rally continued at the start of 2015, especially against the EUR following comments by European Central Bank President Mario Draghi that the risk of deflation continues for the Eurozone, so steps may need to be taken including additional stimulus measures such as quantitative easing in an attempt to stimulate growth. So-called commodity currencies, such as the Australian and New Zealand Dollars, were also showing weakness to start the year, following a weaker than expected Chinese purchasing managers? index. With indications that the Federal Reserve is prepared to raise interest rates, possibly by late second quarter of this year, it appears that the U.S. may pull ahead of most, if not all, of the major Central Banks in finally pulling back on the very accommodative monetary policies that have been in place since the end of 2008.? This could help to keep Dollar bulls in a good mood throughout the year. ?
Technical Notes? -? View Today’s Chart
Taking a longer-term view of the performance for the U.S. Dollar, today we will look at the weekly continuation chart for the U.S. Dollar Index futures (DX). Here we see what could be viewed as a possible head-and-shoulders bottom formation, with the neckline beginning at the highs made back in 2004. The recent rally in the DX has propelled prices toward the ?neckline? near the 92.50 price level, which should be a major testing point for the current bull move. Resistance is seen at the November 2004 high of 92.53, with support found at the October 2014 low of 84.52.
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