Prospects for the dollar by the end of September beginning of October 2018

Since September 2018, the US dollar index is trading lower, which is due to a number of factors. Politics is one of the main factors that put pressure on the American dollar and remains a fundamental factor.

Thus,  the recent criticism of US President D. Trump of a strong dollar and the Fed policy, aimed at tightening monetary policy of the United States, remains as one of the clearly expressed political levers of pressure on the dollar. At that time, according to Trump, most countries manipulate the exchange rate of the national currency at the expense of the dollar and America.

These comments were acutely perceived by the market and the public, given the fact that US presidents have never so openly interfered in the Fed’s policy. Also, we should not forget that the head of the Fed Powell occupies his position  thanks to US President Trump.

On the other hand, the US Federal Reserve does not continue to adhere to a tight monetary policy and already in September is going to raise rates by 25 bps. to the level of 2.25%. And this probability fluctuates near the level of 100%, which the market has already taken into account in the dollar’s price. The questions raise a second increase this year, that is expected in December/January. These expectations remain the main issue of the end of the year. Will it be four increases in US Federal Reserve rates in 2018 or not.

An important aspect of the value of the US dollar is the US trade relations. Since September, the trade tension around relations between the US and Canada and the US and China has declined markedly, partly due to the advancement of negotiations between the United States and Canada and partly from the fact that the market is already accustomed to these risks, as well as to the opposition between the US and China.

How long will last the US trade war against all?

Technically, the US dollar, fixed below 95.00, began working off the figure “double top” and fully worked with reaching the support level of 94.50, and thus was in the oversold zone, completely breaking the four-month uptrend in the US dollar index.

As a result, the dollar has formed a new downward trend, which is limited by oversold. To continue the trend, correction with a flat or resistance test at 94.70-95.00 is necessary.

As a result, while the US dollar index will remain below the psychology of 95.00. The potential for decline will persist. If, however, the Fed does not signal the next increase in rates at the September meeting, the decline in the dollar may significantly accelerate. As a result, the test is not only level 94.00, but also more significant support: 93.70-50 and 93.30.

Anton Hanzenko