Forex Trading: USD Dominating Market Trends

Forex Trading: USD Dominating Market Trends

Forex traders have seen an interesting beginning to 2017, as most of the market is looking for directional clues with reference to where the Trump administration is likely to move the US economy. By most accounts, the online forex trading market is already shaping up to be critical in terms of the long-term price trajectory that could be created if the US Dollar is able to continue with the same levels of momentum.

For these reasons, all forex traders should reassess the current position of the US Dollar, as this will continue to be the dominant currency making trends near-term.

Currency Market ETFs

The PowerShares DB US Dollar Index Bullish (NYSEARCA:UUP) has managed to close at $ 25.90 at the close of 24th January 2017. The ETF has made a 52 week range of $ 23.96 to $ 26.83. The stock has moved about 3 percent in the same period tracking the US Dollar against basket of currency.

The ETF tracks the movement of the currency (US Dollar), consistent with the Deutsche Bank Long US Dollar Index Future Index – Excess Return. The excess return is consisting of the excess return from the Deutsche Bank fund plus the interest income from the debt investment minus the fund’s expenses.  The fund tracks the value of the US Dollar against basket of international currencies which include the Japanese yen, euro, Canadian dollar, British pound, Swedish krona, and the Swiss franc.

As the fund invest primarily in the future contract of the US dollar against basket of currencies, it is not suitable for all kind of investors due to inherent volatility of the future market.

2016-2017 Forex Trends

The USD has gained considerably since June 2016, as the UK voted to exit from the European Union. The British pound was pounded aiding the stronger momentum to the USD rise. Near the end of 2016, the election results convincingly selected Mr. Trump at the help with his Nation First policy, aiding the dollar momentum. Finally, the federal reserve fueled the rise of the USD against all currency by raising the rates.

The fallout effects of the events of 2016 will be felt in 2017 also, specifically for the EUR, GBP, and AUD. The EUR and GBP will have a major impact on the UUP, as it holds 57.6 percent and 11.9 percent of total investible amount in these currencies.

Forex Chart: Guggenheim CurrencyShares British Pound Trust (NYSEARCA: FXB)

In 2017, the United Kingdom government is set to navigate the country through actual exit from the European Union, which will put considerable pressure on the GBP, aiding the UUP ETF. Also, the exit of the Britain will make the EUR on a rough terrain, again aiding the dollar and in turn the UUP ETF.  Overall, the UUP is set for a stronger year ahead if these trends continue to move in a similar direction.

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