The projection for 2016 that the US dollar will remain a market mover in the forex market is among the most debated topics in the forex market currently.
Even though non-US central banks are not likely to cut interest rates above expectations in 2016, a few analysts are expecting the US Federal Reserve to be more upbeat and bubbly.
When wages are increased, Fed may likely raise the interest rate, which may additionally boost the dollar's strength.
Some economists anticipate three interest rate hikes in the United States in 2016. There are projections that there is likely to be one hike per quarter starting from the second quarter of the year.
The difference of opinion over the number of interest rate hikes is what I think will characterize the trend of the US dollar in 2016. The dollar’s upward trajectory movement against other currency majors is, nonetheless, anticipated to be limited by or capped with the recovery of commodity prices.
A few European banks’ commodity analysts expect the global price of oil to get more stabilized over the first quarter and gain a gradual lift beginning from the second quarter of 2016.
Traditionally, rising oil prices occur when the value of the US dollar depreciates. Thus, analysts are of the opinion that although a boost in the dollar's exchange rate is still possible in 2016, the degree of such a rise will be much less compared to the rise witnessed in 2015.
Financial analysts expect the strength of the dollar to be higher than currencies of other G10 countries like the CHF, GBP, andNZD and currencies where central banks are still skewed towards reducing (EUR, CHF).
Dollar Index Could strengthen
Results of a few fundamental research show that the US dollar index ought to subsist in its upward trajectory movement for most part of 2016. The dollar rate is expected to rise a bit more than the rate in 2015, but the rise will only subsist for a short period of time.
The present dollar index levels are at 93.25/92.50. Analysts suggest that persuasive comparison could be drawn between current price actions and the price actions of the 1990s when the dollar index showed similar trend
The index got reduced afterwards persistently and slightly towards the anticipated index pattern. Then, the bullish USD cycle subsisted for nearly a decade. Because of this, analysts are of the opinion that the upward trend of the dollar’s strength will continue in 2016 with a historic benchmark of 106.60/109.00. This benchmark is same as the projected upward and downward index levels of the preceding down trend.
Forex indicators also show that the dollar will move up a bit for sometimes before finally attaining maximum growth. This implies that there is still possibility for bullish movement of the dollar in 2016.
The index appears to hang about in the 103.30/104.10 direction as projected by analysts. Despite this, there are still chances that price trend will get balanced up in so far as the limit stated earlier is attained.