Wall Street economists seem to be concerned about the fact that the Fed is currently tapering QE3, which is nearing its end. They are afraid that once the quantitative easing program is tapered to zero, this even may trigger a market crisis coupled with an economic decline and inflation hike.
US stock indices keep on staying close to all-time highs. Meanwhile, the US Dollar went up by 0,2% yesterday versus a basket of 6 other majors, which are the currencies of the USA's major trade partners, Market Leader reports.
According to June's quarterly report conducted by the CNBC among economists, strategists and analysts from Wall Street regarding the Fed's current policies and plans, the respondents' views are controversial.
34% of them assume that the QE tapering currently conducted by the Fed is going to end up with a major recession coupled a US stock market crash and high rate of inflation.
Other 34% of the respondents assume that the Fed is going to switch to more «normal» policies. The remaining 32% believe that the risks are balanced at this point.
The mentioned survey is probably going to be a positive one for the Fed since the majority of the market participants accepts the risks amid ultra-low interest rates as well as future risk, so they control and curb the risks. The survey also shows that the Fed's current policies curbing the US economic recovery since investors are afraid of a possible market crash and do not want to invest under such circumstances.
At the same time, most market participants support the Fed's policies. 35% of the respondents assume that the central bank should keep on tapering QE3 at the current pace. 62% of he respondents believe that the Fed's communication with the world is pretty transparent and clear at this point and therefore it deserves trust.
US Dollar Index: Mid-Term Prospects
Yesterday, the Fed started a 2-day meeting. July 30th is going to be rich in economic reports and political events, especially for the American currency. That is why we are likely to weakness much higher volatility shown by straight currency pairs as well as the US Dollar index, Masterforex-V Academy reports.
Having analyzed the current situation in the market of the USD index, some trading experts working for Masterforex-V Academy see the following picture:
In particular, they say that the price is currently testing the turning point represented by the MF pivot located at 81,25 on the H1 chart. The USD index is aimed at this year's high at 81,40.
If the preliminary estimation of the US GDP report for Q2 2014 comes out batter than expected or at least matches all those market expectations and the Fed reassures everyone with its optimistic projections, the US Dollar may well resume its strengthening against other majors, especially against the common European currency. On breaking above 81,25, the price may go up to 81,40 and 81,48 or even higher.
Alternatively, if the macroeconomic reports from the USA appear to be negative, especially when coupled with the Fed's pessimistic projections, the US Dollar will face severe pressure. IF the price goes below 81,08 it may well reach 81,00 and even 80,79.
