What will happen to the dollar index after "Irma" and "Harvey"


The calculation of losses from natural disasters is out.

Hurricane Irma has almost calmed down and now it’s time to assess the damage. After Harvey's passing about $ 12 billion were already paid for insurance payments. Of course, losses, in this case, were incurred by insurance companies. The fact is that as of June 20, 2016 in Harris County, a region that includes Houston, only 15% of the property was insured against floods. Also there is a National Flood Insurance Program. The program pays damages to those who do not have flood insurance, and often borrows from the Treasury Department to fulfill their claims obligations.

We will be able to observe after a full assessment of the damage from natural disasters, a surge of activity related to the need to restore the affected regions. This means activity in the real estate and employment market, which can help the dollar strengthen its position.

On the other hand, these are internal costs that will be covered by the state. Therefore, experts differ in their judgments, how this will affect the economy and where the dollar index will go.

At the moment, the index continues its downward movement after yesterday's slight increase and at the moment is 91.78.

GBP/NZD: Technical Outlook before UK Bank Rate

The GBP/NZD is ahead of 1.8360 after breaking through the resistance area.

If you want to be successful in Forex trading, you have to follow your rules and your trusted analysis, especially if you use classical methods of analysis. In our last report about the GBP/NZD pair we recommended buying the pair for several reasons: lthe pair had reached further than 61.8% Fibonacci and was trading above the ascending trend line, and there also was a double bottom pattern, all of which are signs which told us to buy the pair. This is why we bought it at 1.7700 - we have taken our profit at 1.7850. Then we bought the pair again after breaking the neckline at 1.7885 and the prices hit our target today at 1.8230.

The pair is now trading around 38.2% Fibonacci in a series of impulse waves, after it reached 1.7500 - close to the upside trend line. The pair has a resistance area at 1.8362 which the pair is expected to reach in the next few days. That is in case the pair is still trading above the support area at 1.7906 and the moving average 50. The Stochastic indicator started giving us a sell signal, which is a sign that the pair will make a downward correction movement.

The Next Few Days

From this classical analysis of the pair we can’t take any positions now at the current level. We can buy the GBP/NZD at the support level 1.7906 or sell at the resistance level 1.8362, but we prefer the buying scenario for the next trading days. In effect, we can take a buy position now with a small volume and keep our target at 1.8362.

This week the market has some hot news from the UK like the CPI and the official bank rate next Thursday.

The North Korean Crisis

Tensions continue to rise as North Korea's Independence Day looms around the corner.

One could hardly go through this week without hearing about what is shaping up to be the biggest global issue right now: North Korea. The isolated communist state came under the spotlight three weeks ago when North Korea leader Kim Jong Un announced his intention to launch an attack on Guam, a territory under the jurisdiction of the United States. What ensued was a series of threats between Trump and Kim Jong Un, which led to a tense situation on the global financial markets. The stress began to ease off last week, but on Sunday the world awoke in chaos again, as North Korea performed a successful test of a hydrogen bomb in the ocean, which resulted in an earthquake felt in neighboring South Korea and Japan.

Even though there were no casualties, this strike was quite significant. For one thing, many countries had speculated that North Korea did not have the technology to successfully mount such a destructive bomb on a missile, nor to aim it properly. Since the country lives under a self-imposed isolation from the rest of the world, their development has been hampered by a lack of exchange of technologies. It has also been very difficult for the rest of the world to evaluate the readiness and conditions for war in North Korea due to the lack of information (or, rather, the state propaganda that is broadcast instead of information, which many suspect is inaccurate). However, this strike proved that North Korea is much farther ahead in its nuclear program than previously assumed – a power on which Kim Jong Un’s regime relies. The North Korean leader has repeatedly ignored the condemnation of the United Nations regarding his nuclear weapons – and from his perspective, as someone who faces many enemies and might have to protect his position with force, it makes sense that he wants to hold on to his weapons.

It is also important to add that while hydrogen bombs are not talked about as often as atomic ones, they are in fact more dangerous. The test that North Korea performed had five-six times the magnitude of what the USA used in the devastating World War II attacks on Hiroshima and Nagasaki in Japan. If North Korea does have the means to send these missiles across the globe to attack North America, the destruction will be unprecedented.

To try to mitigate the crisis before the irreversible occurs, the United Nations again spoke about sanctions against North Korea. The United States, arguably the loudest voice in the argument, has suggested a ban on exporting oil to North Korea. Without fuel, the country would definitely be forced to reconsider its policies, but it might also cause a serious economic crisis in the country where the living standard is already reportedly poor enough.

Even if an oil embargo could success in theory, we might not see it in practice. North Korea trades with two countries: Russia and China, both of which are members of the UN Security Council and could veto the embargo. Even though both have spoken against North Korea’s recent actions, it is unlikely that they would support anything too harsh. China, in particular, does not wish to lose its position of importance in North Korea. Russia too is protecting its interests by supporting the claim that an oil embargo will endanger the civilian population more than it would neutralize the military program of North Korea. The United Nations Security Council is yet to vote on any measures against North Korea.

Meanwhile, amid the geopolitical tensions we saw the financial markets in disarray. Stocks moved up and down, as did currencies. The dollar lost some of its positions against major currencies, and the EUR/USD was able to pass the psychological threshold at $1.20. We should note, however, that the American dollar also suffered for other reasons – the destruction caused by hurricane Harvey hasn’t been fully documented yet, and the US southern coast is again in danger of another hurricane, Irma.

The big winner this week has without a doubt been the gold, which reached its highest level in a year. As a safe haven asset, gold is attractive to traders who find other instrument too insecure at the moment. Now the markets are holding their breath as tomorrow North Korea celebrates its independence and there might be another attack to “commemorate” the day. As long as the tensions continue, we are likely to see this trend stick around.

NZD/USD: Short Review & Analysis

We expect the pair to move in a slightly bearish way today.

Today we would look at the NZD/USD currency pair.

For some time now the pair has been moving in a bearish manner below 0.7217, down from 0.7247 previously. The level of 0.7217 actually proves to be an insurmountable resistance level for the NZD/USD at this moment that the pair is simply incapable of overcoming. The NZD/USD seems to be inching closer to the nearby support at 0.7174, so we need to stay alert and be patient until the sideways price channel is fully formed.

Quite on the contrary, Wednesday saw the pair attempting to make new gains, trading above the first resistance and climbing towards the second one at 0.7290. After it failed to overcome it, it retreated to the type of movement we see today. It is not very likely that we would see the pair climb to the second resistance, since the first one is proving to be quite challenging. Therefore, we can wait and see if the NZD/USD will actually drop further down and provide us with a good opportunity to trade on a more pronounced bearish trend.

In the current scenario it would be best if we took sell positions below the resistance at 0.7247, placing our first target at the nearby support level at 0.7174. If the NZD/USD drops further down, our second target would be 0.7144.

Currently the pair is trading around 0.7198, above the support levels. All technical indicators are unanimously giving us a strong sell signal.

USD/CHF Technical Analysis & Daily Chart

With the recent development we see a potential for further growth in the USD/CHF rate.

Today we direct our attention to the USD/CHF currency pair.

The USD/CHF managed to rise above its support level at 0.9558 yesterday and mark new highs near 0.9670. We expect that this movement above the support would persist for a while. The price is approaching the nearby resistance level of 0.9693. If it manages to overcome that, we can see it grow further to the second resistance at 0.9725. As long as the pair moves above the support level at 0.9558, we hope to see a continuation of the bullish movement from yesterday.

In terms of trading this pair well today, we should expect it to move within about 90 pips, based on the USD/CHF’s previous behavior on the market. Any buy positions should be placed above the pivot of 0.9558, with a first target at the resistance at 0.9693, and a second target at the next resistance level at 0.9725, which is likely the best candidate for a T/P order, as it is unlikely that the pair will be able to overcome it and would likely drop after testing it. However, this strategy is only suitable if the pair remains above 0.9558; if it drops below, we should close these positions.

As of the moment of this article’s publication, the USD/CHF is trading around 0.9595 and technical indicators agree on a strong buy recommendation.

The Dollar Moving Down

Amid the latest economic reports, the American currency is losing positions against all major currencies.

The dollar fell sharply against all major currencies after the labor market data release in the US, which was worse than expected. As reported by the US Department of Labor, last month 156,000 jobs were created, which is below the projected 180,000. The indicator for July was revised downwards from 209,000 to 189,000. The unemployment rate rose to 4.4%, instead of the previously forecasted 4.3%. All of this indicates a worsening of the situation on the labor market. The report also shows the average hourly rate grew by 0.1% in August, compared to the expected growth of 0.2%. One of the main indicators of inflation, the Core PCE, has decreased to 1.4%, while at the beginning of the year it was above 1.8%. Such statistics practically leaves no chance for another increase in the discount rate this year.

Federal Reserve representatives have expressed their concerns about the low dynamics of consumer prices over the recent months and its impact on the future monetary policy of the US Central Bank. Soon after the US statistics release, information from the ECB suddenly appeared. Sources in the European Central Bank, quoted by Bloomberg, declared that the plan for ending the quantitative easing program could be ready no earlier than December. "The politicians of the European Central Bank may not be ready to curtail the quantitative easing program until December," the sources said.

After the release of US statistics, the EUR/USD rose 0.5% to 1.1970, approaching a two-and-a-half-year high on Tuesday (1.2069), but after a verbal intervention by the ECB, it returned to 1.1900. Earlier the euro surrendered its position after reports about the increasing number of ECB officials who are concerned about the recent strengthening of the European currency.