Tuesday, November 8, 2016

Dollar Looks Bullish, But Needs To Break Out

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*The dollar has positively reacted to rate hike news.
*We expect more rate hike news to come which could propel the dollar higher.
*That said we need it to confirm a nearby breakout level.

The Fed gave clarity that it plans to raise rates in December. Fed Vice Chair Fischer also confirmed the Fed plans to let inflation run thereafter. We showed that both comments could be negative for stocks SPY and bonds TLT AGG. The dollar UUP, however, looks like it has a chance to hold up. It would still need to break out but it has performed well on similar recent news events.
Late Friday Fed Comments Should Help the Dollar
The Fed Vice Chair said late on Friday: "Our assessment is that the most recent data have further strengthened the case for increasing the target range for the federal funds rate. The markets put a probability of above 70 percent on the rate being increased in December."
He specifically mentioned December as a timeline for the next rate hike. One of the more recent market realizations that a rate hike was likely hit markets on Sept. 9th. We wanted to see how the dollar acted on Sept. 9th, which we will review later on.
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