When the latest labor report was released for November 2016, the U.S. dollar dropped in price against other major currencies. There were slightly more jobs added to the economy during the month than what were expected, and although this could have been much stronger, it added to the perceived strength of the U.S. stock market and overall economy. This pushed the dollar down, at least for the time being.
The dollar has seen a surprising increase in strength around the world over the past several months. And it’s very likely that the weakness that the dollar saw after the job report was released is just a temporary setback. At least, that’s what most technical analysis methods indicate. There is still quite a bit of momentum backing the USD, and the long term (100 day) exponential moving average points to the fact that the USD is still the strongest currency in most every pair that it comes up against. This can change, of course, but it doesn’t seem likely to in the near future.
According to most estimates, this setback was a necessary correction. Since the U.S. Presidential election results came out, the dollar has been rallying against most other currencies, and there’s a decent chance that the dollar has become overvalued compared to them. A drop in price might be a temporary setback, but it helps recharge the dollar’s growth as we get closer to the New Year and any decisions that the U.S. Federal Reserve might be releasing before the start of 2017.
In the grand scheme of things, the dollar is still very much in a bull trend, and it has been since 2013. If you look at a long term chart of the U.S. dollar index, the dollar has been creeping upward, although for the last two years, that momentum has been confined in a wide range of consolidation. For short term traders in the Forex markets and binary options markets, this hasn’t been problematic. In fact, because the consolidation range is so precise, it has made swing trading and all types of trading that occur on a smaller timeframe very easy when it comes to prediction. Traders just need to wait until the index price approaches one of the limit prices and then take out an opposite position in their marketplace of choice. It’s certainly not an exciting type of trading, but when done consistently, it can create large amounts of profit, especially for those traders that are willing to grind out these types of trades.
Having a signals service in place to help you know when these limits are approached is a great idea and a huge time saver. It’s possible to program these into your MetaTrader account if you are a Forex trader. This way, you are able to define what trades you want to execute whenever the appropriate signals are triggered. For a binary options trader, this is a lot harder, but with the use of trading robots and alert services, you can automate a lot of this process and regain the edge that you may have given up when you switched to binaries for the higher profit rates.
It’s worth pointing out that the U.S.’s monetary policy is currently very different from the rest of the major economies in the world. While the U.S. is interested in raising rates, Japan and the Eurozone are all lowering rates. Both of these economies have dipped into negative rates, and not much is known about what the long term consequences of this are. That leaves the U.S. dollar as the most reliable currency in the world, giving it advantage when it comes to fundamental strength, too.