Weekly Currency Review: US Dollar Remains Strong As Trade Tensions Are Ebbing

Weekly Currency Review

DXY Index Price Chart: 5-minute Timeframe (from June 20 to June 27, 2018). Source: Tradeview.com

After a strong climbing since the mid-April, the US Dollar Index (DXY) surged to a level of 95 last Thursday, breaking out the November high. The index then had a pullback in the following days and reached to a low of 94.18 on June 26th, alleviating the short-term overbought that happened weeks before. The escalation in the trade tension involving the US-China-the European Union trade front threatened the demand for dollars during this slump. The index is expected to gain a rebound support at this point since along with the country’s economy and hawkish monetary policy, market also holds optimism in the positive impact that the trade restrictions brings to US economy, that is to lead a surge of domestic investment.

USD/JPY Price Chart: 5-minute Timeframe (from June 20 to June 27, 2018). Source: Tradeview.com

The demand for Yen showed resurgent since last Thursday. The risk-off sentiment continued to remain souring in the escalation of trade war fears. Markets concerned about that the risk sentiment would be deteriorated if more protectionist measures were triggered. Investors thus dump high-risk assets and buy in more this safe-haven currency. China and the EU vowed to avoid trade protectionism under the agreement that unilateral actions risked pushing the world into a recession. Bank of Japan released the central bank’s aim to stick with its current easing framework to support improvements in the employment and consuming condition. On June 26th, Japanese Services Producer Price Index (SPPI) was published at 1.0% as expected. The market risk appetite would still have impact on the direction of this pair.

EUR/USD Price Chart: 5-minute Timeframe (from June 20 to June 27, 2018). Source: Tradeview.com

The most recent macroeconomic data released from Eurozone showed a worse-than-expected situation. The Producer Price Index for April was 2.0% in year-over-year rate, below the expectated level of 2.4% with no monthly increase compared to 0.3% in April. The Senix Investor Confidence in June also came in below expectation. Despite the plunging confidence, the Euro still gained some rise with the market expectation on ECB’s tighter monetary policy. Markets are waiting for ECB’s June meeting when the end of QE program will be announced and the forward guidance would be given. In the long term, the downside element for this pair price comes from the expected higher Fed fund rate.

USD/AUD Price Chart: 5-minute Timeframe (from June 20 to June 27, 2018). Source: Tradeview.com

The Reserve Bank of Australia maintain the key interest rate of 1.5% for 20th month with seeing the weak employment rate and house sales. The market expected that the inflation is likely to remain low although the low interest rate would support the economy. The pair hit a low as the trade spat between US and China put more risks in the commodities trade. Starting this week, Australian dollar was dragged down further by the plummeting equity prices, but the currency recovered to some extent supported by surge in cruel oil prices and 700 billion Yuan in liquidity leased by China’s central bank 50bps reduction of reserve ratio requirement. The Australian dollar remain under pressure for the foreseeable future amid ongoing trade tensions.

On June 11th, for the forecasting period of 14 days, I Know First Algorithm gave EUR/USD a signal of -4.90 with the predictability of 0.2, suggesting we expected this pair would fall and gave bullish view on dollar against Euro. The actual movement was -0.54%, which demonstrated our forecast. Our algorithm also successfully predicted USD/CAD movement based on pattern recognition by providing a signal of 2.92 and a predictability of 0.29 and the actual movement was 2.85% in the forecasting time range.

Algorithmic traders utilize these daily forecasts by the I Know First market prediction system as a tool to enhance portfolio performance, verify their own analysis and act on market opportunities faster. This forecast was sent to current I Know First subscribers.

View More Currency Forecasts

How to interpret this diagram

Algorithmic Currency Forecast: The table on the left is the forex forecast for the forex outlook produced by I Know First’s algorithm. Each day, subscribers receive forecasts for six different time horizons. Note that the top 54 currencies in the 1-month forecast may be different than those in the 1-year forecast. In the included table, only the relevant currencies have been included. The boxes are arranged according to their respective signal and predictability values (see below for detailed definitions). A green box represents a positive forecast, suggesting a long position, while a red represents a negative forecast, suggesting a short position.
Forecast Performance: The table on the right compares the actual currency performance with I Know First’s prediction. The column titled “Forecast” shows which direction the algorithm predicted, and the column “% Change” shows the actual currency’s performance over the indicated time period. The “Accuracy” column shows a “v” if the algorithm correctly predicted the direction of the stock or an “x” if the forecast was incorrect. The “I Know First Hit Ratio” represents the algorithm’s accuracy when predicting the trend of the currency.
Signal: This indicator represents the predicted movement direction/trend; not a percentage or specific target price. The signal strength indicates how much the current price deviates from what the system considers an equilibrium or “fair” price.
Predictability: This value is obtained by calculating the correlation between the current prediction and the actual asset movement for each discrete time period. The algorithm then averages the results of all the prediction points, while giving more weight to recent performance. As the machine keeps learning, the values of P generally increase.

Please note-for trading decisions use the most recent forecast. Get today’s forecast and Top stock picks.

Comments are closed.