The dollar will fall, if stabiliziruemost and equity markets will rise
Weekly charts indicate a developing shift down relative to the dollar. Indications have emerged that investors start to close long positions in dollars. Falling before the assets grow at the beginning of this week. Increased stocks, crude oil and the Euro. The stock market was supported early in the week, news about Brexit. These news helped to support the European currency. The weakening of the American currency made dollar-denominated oil more attractive to foreign traders. In General, it is safe to conclude that the main markets react primarily to the weakness of the US dollar.
Traders speculate whether the indicators of consumer inflation in November will be lower. This compensates for the prediction of the fed about overheating inflation. And that is the cornerstone of the plan of the fed to raise interest rates at least three times next year. In addition to concerns about inflation, the dollar also weakened due to comments of several fed officials, who said that rate hikes may stop.
Thus, what we are seeing in the stock market and oil markets — positioning and adjustment of the positions associated with the possibility of reducing the value of the dollar in the short term. In addition, there are other signs of adjustments. According to the latest data of the Commission on trade in commodity futures, long-term dollar positions declined slightly. Although the pressure on the dollar began two weeks ago, this situation changed last week. The search for safe assets caused a sharp drop in stock prices, has caused demand for the greenback.
If the stock continues to rise, the dollar may weaken as a result of less tight monetary policy of the Federal reserve. Sales of the dollar may even accelerate if the Euro will get enough support from the transaction Brexit and the end of the fiscal conflict between the European Union and Italy. A weaker dollar will be bullish news for gold and crude oil, Australian and new Zealand currencies.
Forex broker FXOpen