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Currency Analyst since 2010

US dollar: forecast for Februaty 15-21

By Elizabeth Belugina

US dollar index fell to the lowest levels since October. The Federal Reserve’s Chairwoman Janet Yellen said that she still expected the central bank to increase interest rates gradually this year. At the same time, she underlined that the central bank won’t necessarily do that taking into account volatility in global stock markets. In addition, Yellen noted that the US central bank was studying the feasibility of pushing short-term interest rates into negative territory in case the economy needs additional boost.

Although Yellen’s comments weren’t themselves that bearish, the market’s reaction was very sharp. Investors have dramatically pushed back the expectations of the Fed’s rate hikes this year. According to the CME, Fed fund futures don’t price in rate hikes this year anymore.

In order to find firmer support and recover the dollar needs better data from the US. On Monday American banks will be closed in observance of Presidents’ Day. A lot of important statistical data will be come out on Wednesday: building permits, producer prices, housing starts, industrial production. In addition, the Fed will publish the minutes of its January meeting. Also pay attention to American inflation figures on Friday.

Resistance for USD index is at 97.20, 98.50 and 99.00, while support is in the 94.00 area. 

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