The dollar has strengthened since the announcement that the Federal Reserve’s rate setting committee, the FOMC, had decided to increase its interest rate by 25 basis points. However, could it be that this turn of dollar strength will not be sustained in the coming weeks? A stronger dollar could be a sign of the market’s confidence in the FOMC’s ability to deliver the four rate hikes in 2016 that the committee’s aggregated projections calculate. However it is also possible that the market is overly optimistic about this and this dollar strength will not last the distance. It is possible that this strength could last over the Christmas period, however with the decline in longer term growth expectations (as shown through the US 10 year yield which is again under pressure), in addition to the deterioration in the US economic data, markets such as EUR/USD could be set to fight back.
The report looks at the key economic data releases to watch out for this week amid shortened trading due to the Christmas holiday. What is the position of forex markets as we move into 2016? Furthermore there is a technical analysis of two key markets that could be set to fight back against the dollar strength, Euro/Dollar and Dollar/Yen. Equity markets appeared to be the big winners from the FOMC decision, however it looks as though the initial euphoria has already run dry. I look at the outlook for equity markets as we move into the new year, whilst there is also a technical analysis of the German DAX Xetra and the FTSE 100 Index. Finally what about the commodity markets? The moves on precious metals have been volatile, but where does a Fed rate hike leave the strategy? Furthermore, can oil prices finally find a bottom? And what about the moves on the 10 year Treasury yield. There is also a technical analysis of gold and Brent Crude oil.