Today, on August 15th, the US Dollar is consolidating close to 81,60, thereby continuing to trade close to the high of the year located at 81,72. As we can see, the European and Chinese economies are currently seeing an economic slowdown whole the UK and US economies are the only developed economies that are currently capable of sustaining moderate but stable growth.
Still, this means that the developed economic world is currently without the support of the EU, Japan and China. The British and American economies are now left to struggle to drag the global economy out of stagnation on their own, which is next to impossible.
Meanwhile, multiple economic reports coming from around the globe suddenly deteriorated. Apparently, this couldn't but trigger panic among traders and investors.
In particular, according to yesterday's report from China, there was a sharp lending decline in the local housing market in July.
At the same time, the Eurozone economies headed by Germany matched investors' worst expectations, thereby confirming that the local economy is incapable of growing and showing signs of strength at this point. There was no GDP growth in the Eurozone in Q2 2014. The year-over-year growth reached only 0,7%, thereby matching expectations.
It should be noted that some EU and Eurozone economies located closer to the East are vulnerable and sensitive to the endless sanctions against Russia. It appears that the Ukrainian crisis starts seriously affecting the entire EU.
Japan also saw a major economic slowdown in Q2 2014. In particular, the Japanese GDP dropped from 6,8% to 6,1% during the reporting period, which is a wakeup call that the sales tax hike keeps on affecting the national economy.
Meanwhile, the US economy, which is the world's biggest one, keeps on recovering and growing. The contrast between the economic reports coming from the USA and Europe becomes more and more distinct. Such contrast may raise the demand for US Dollars. Still, the global economy is slowing down. This fact may affect the Fed's forthcoming interest rate decisions, thereby postponing interest rate hikes.
The Bank of England also reports that despite healthy economic growth in Great Britain, it is not going to start raising interest rates earlier than planned (mid 2015). Apparently, major central banks become very cautious about their interest rate statements.
US Dollar Index Prospects
According to Masterforex-V Academy, the H1 chart of the USD index show us that the current tendency is bullish, which means that the buyers of the US Dollar are currently strong and dominating the entire currency market.
Still, the bears are still trying to exert pressure from time to time, thereby making the USD index retrace and defending the 81,69 level, Masterforex-V Academy reports.
If the decline continues to make the price reach 81,47 and 81,41, we are likely to see it breaking below the MF sloping channel defending the rally. If so, a downswing to 81,36 may further trigger a bigger-scale downtrend.
If the pivot close to 81,69 is tested and broken after the price stays above 81,63, we are likely to witness a further mid-term rally up to 81,72 and above.
