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Can Dollar Climb Continue After FOMC Forecast Shift?

Can Dollar Climb Continue After FOMC Forecast Shift?

John Kicklighter, Chief Strategist

Talking Points:

USDOllar marked a critical technical break of 12-year highs and has further shaped a convincing bullish pattern

• The drive to this resistance and break beyond was founded on a significant upgrade on rate speculation

• A jump in Fed Fund probabilities from 6% to 64% suggests a lot of the untapped potential may be tapped

See how retail traders are positioning in the majors in your charts using the FXCM SSI snapshot.

A month ago, the market's skepticism over a Fed hike before year's end was severe. Fed Fund futures were pricing in an anemic 6 percent probability that the central bank would be able to leave the zero bound at its December 16 meeting. Today, the same market benchmark places a 64 percent chance. That is a dramatic leap in speculation, and the impact was clear on the Dollar with a market-wide climb that drove the USDollar Index beyond 12-year highs. In working off this skepticism there was remarkable fundamental fuel to bolster the currency's standing on the monetary policy scales. Yet, now beyond the technical boundary, what further untapped well is there to fuel conviction to further advance? A technical break doesn't ensure momentum and conviction. And, the Forex market's most productive theme already sees the Dollar at the top of its class. There is still a dovish market segment whose capitulation could add fuel to the fire, but it won't be easy. We focus in on the Dollar and its primary fundamental driver in today's Strategy Video.

USDOLLAR AND RATE SPECULATION

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