'The dollar still remains the "cleanest shirt in the dirty pile" ' - Yohay Elam, Forex Crunch

YOHAY ELAM
PROFILE
• Current Job: Analyst at Forex Crunch
• Career: Founded Forex Crunch. Has been in the FX markets since 2005. Speaker and host at FXStreet Live Video channel.

View profile at FXStreet

Yohay Elam has been into forex trading since 2005, and shares the experience and the knowledge that has accumulated. Like many forex traders, Elam has earned the significant share of knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always been of interest to him.

He founded Forex Crunch and is now one of the main speakers on our Live Video channel, hosting "Europe Live Market Open" every day from 8:00 to 9:00 GMT.

Do you think the slump we saw in the USD last week was just a correction? Or will the greenback bulls be in trouble for real this year?

I think that what we have seen is a significant correction, that might last a bit more. The bigger picture is that we are witnessing a race to the bottom between central banks. Despite the losing streak of economic indicators and the fall of the greenback seen just now, the dollar still remains the "cleanest shirt in the dirty pile". Other central banks such as the BOE, BOJ and ECB have all turned more dovish in the past month, limiting big trouble for the dollar bulls.

Is the Fed still in track to hike rates multiple times in 2016?

The Fed is likely to hike one or two times in 2016. One of the reasons for at least one hike is the central bank's credibility. It will be hard for Yellen and co. to totally reverse policy or make the December 2015 move a "one and done". A removal of the base effects in inflation (the big fall in oil in early 2015) could provide the Fed the necessary fuel to make another move. Together with somewhat stronger wage rises, they could see inflation getting closer to the target, expressing less worries and eventually making another move.

Where will the EURUSD head in the mid-term? Can Draghi's potential QE extension in March set up a new bearish run in the pair?

Draghi may have one more move left in March. He could cut the deposit rate again, announce more QE, extend QE beyond March 2017 or all of the above, but basically, the tools are limited. The ECB is probably unhappy with the rise in the value fo the euro and more easing in March could push it down. However, after a few more months of struggle, markets could understand that the ECB has nothing left, and a recovery could begin.

Can oil producers sustain prices around 30$/barrel until next OPEC meeting in June?

Both OPEC and non-OPEC producers have shown relative resilience to the fall in oil prices. Production remains quite high. We might have a bigger crisis when inventories fill up or a relief if demand finally rises, from growing countries such as India. In case prices continue struggling, it is important to remember that OPEC alone cannot lift oil prices. The various members all want others to cut. It is hard to see Iran cutting production after it just came back online and a cut by Saudi Arabia will only help the others. It is also hard to see non-OPEC Russia and Saudi Arabia cooperate given their opposing views on the war in Syria.

We've seen recent bullish runs for typical safe-haven assets as Gold and JPY. Are the market fears justified? Are we heading into another financial crisis?

I don't think that another great financial crisis is coming, but this "new normal" or "new mediocre" as IMF MD Lagarde put it, is spreading to emerging markets. A significant slump in stock markets is on certainly possible, but a 2008 style crisis would need much bigger triggers. In 2011 and 2012 we have also seen safe haven assets in demand, but the global economy muddled through. We may see that again.