Today, on September 26th, 2014, the USD index, reflecting the strength of the US Dollar against a basket of 6 other majors, seems to be continuing its rally. So far, the index has gained 0,15%. This happened after US stock indices closed the trading day in the red zone yesterday. The US Dollar and other safe-haven assets gained value amid higher concerns about the near-term future of the global economy as well as the existing geopolitical risks, including the situation in Ukraine.
It is not accidental that short-term stock investors are currently abstaining from active moves and prefer to stay risk averse. They are reducing their exposure in advance of the weekend, thereby switching to bonds and other safe-haven assets. The concerns around the global economic prospects strengthened after China announced its decision to abstain from further aggressive stimuli. At the same time, the European economy also showed signs of an economic slowdown.
At this point, the bearish sentiment is dominating the market of EURUSD as most market participants expect a long-term decline since the ECB is determined to keep on stimulating the Eurozone economy while the Fed is about to finish tapering QE3.
At the same time, investors seem to be reducing their exposure to emerging markets, Bank of Nova Scotia reports. Meanwhile, stock markets are weak, which is probably caused by massive restructuring of investment portfolios close to the end of the quarter coupled with increasing uncertainty and decreasing trading volume.
European stock indices closed with a decline: FTSE dropped by 0,99% down to 6639,71, DAX – by 1,57% to 9 510,01, 600 – by 0,85% to 341,44.
US stock indices also followed their European counterparts yesterday. Dow Jones Industrial Average decreased by 1,5%, to 16 961, S&P 500 lost 1,5%, thereby reaching 1962,00. The volatility index called CBOE increased by 18% up to 15,64, thereby setting the high of the month.
Today, we are about to witness the 3rd and last revised report on the US GDP in Q2 2014. While the consensus forecast is 4,6%, the latest figures indicated 4,2%.
Dollar Keeps On Gaining Value
According to the trading experts of Masterforex-V Academy, the mid-term and long-term uptrends are still underway. Still, the price is retracing after recent gains.
However, the US Dollar index still has some upward potential. It may resume the rally if backed by strong fundamentals scheduled for today. In particular, the consumer sentiment index and the revised US GDP report have to match or exceed expectations in order to help the world’s major currency gain a little bit more value against other majors. With that said, if strong figures help the price overcome the resistance at 85,49, we are likely to see a further upswing to 85,75 and 86,00.
Alternatively, if the reports fail to back the USD index, the most likely scenario is a further bearish reaction down to 85,09, a break below which will give way to 84,60.
