Will USD’s Impressive Rally Continue This Week?

The rally of the US dollar has been impressive during last week 14th-18th November 2016. The dollar showed strength and significant revaluation against major currencies. The EUR/USD pair closed on Friday 14th November 2016 at 1.05859 down from 1.08218 on Monday 11th November 2016. The GBP/USD pair closed the week at 1.23419 down from 1.25886 at the start of the week. And the USD/JPY pair was up to 110.853 at the end of last week from 106.806 at the start of trading week.

There is no doubt that the US dollar has attracted a lot of bullish investors and the main reason is because there is an imminent interest rate hike from the Fed, possibly during December 2016. Last week, Fed Chair Janet Yellen made some very interesting comments, which added momentum to the strength of US dollar.

The first comment was that economic conditions are pointing to an interest rate hike and there is probably no reason to wait or delay on that. The second comment was that she is determined to carry out her elected term as Fed Chair, as new US President-elect made some comments about a possibility to intervene in the current Fed chairman position. We do not think that this is likely as the Fed has showed independence from any political parties or pressures.

With new trading, business and financial week having an official holiday for US, what can we expect about major currencies and the US dollar? First, lack of liquidity during the end of the week could cause potential spikes either up or down in US related currency pairs. On Friday 25th November 2016, we have the fundamental release of JPY National Consumer Price Index, year over year change for the month of October, and also on same day the news release of GBP Gross Domestic Product, year over year change for 3rd quarter.

A few hours later, an important US related fundamental news release, USD Advance Goods Trade Balance for the month of October. So with 3 major announcements on the same day, Friday 25th November could be a volatile day for USD/JPY and GBP/USD.

If we factor in that now the US dollar is significant overbought against major other currencies, prudence is required as always. The trend for the US dollar so far is being revaluated against major currencies, as long this trend is dominant in the forex market we can trade with the trend.

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