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US Dollar (USD) Continues Rallying as Interest Rate Cut Looms

US Dollar (USD) Continues Rallying as Interest Rate Cut Looms

Nick Cawley, Strategist

US Dollar Price, Chart and Analysis:

  • US dollar strength continues as Fed rate cut nears.
  • US dollar basket boosted by EUR and GBP weakness.

Q3 2019 USD Forecast andTop Trading Opportunities

Keep up to date with all key economic data and event releases via the DailyFX Economic Calendar

The US dollar continues its recent push higher against a range of other currencies and may push even higher against the EUR and GBP, despite a round of impending US interest rates cuts looming on the horizon. Interest rate cuts normally cause a currency to weaken – as interest rate differential between currencies narrow - yet the USD seems to be currently regarded as the ‘best of a bad bunch’ as both the EUR and GBP have underlying problems, notably a lack of growth and inflation and a Brexit overhang respectively.

The Federal Reserve is fully expected to cut interest rates by 0.25% at the end of July and may cut by 0.50% according to market pricing. US President Trump is pushing hard for the Fed to cut rates to weaken the US dollar to make it competitive on the global stage.

The US dollar’s recent leg higher was prompted by news that US officials may fly to Beijing next week for talks over the ongoing trade dispute as both sides look to ease the ongoing trade tensions. President Trump and the Democratic party also agreed overnight to increase the US debt ceiling alongside a new spending package with the proposal expected to be voted through both Houses in the coming week.

The US dollar basket currently trades near levels last seen on June 19 and remains less than half-a-point away from the recent ‘double-high’ seen in early- and mid-June. The 200-day moving average remains supportive in the short-term, along with the 20- and 50-dma, while upside momentum may be crimped by the CCI indicator that is just moving into overbought territory.

US Dollar Daily Price Chart (November 2018 – July 23, 2019)

US Dollar (USD) Continues Rallying as Interest Rate Cut Looms

Traders may be interested in two of our trading guides – Traits of Successful Traders and Top Trading Lessons – while technical analysts are likely to be interested in our latest Elliott Wave Guide.

What is your view on USD – bullish or bearish? You can let us know via the form at the end of this piece or you can contact the author at nicholas.cawley@ig.comor via Twitter @nickcawley1.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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