Dollar remains in control against its peers and fresh lows could be expected

The US Dollar enjoyed strong gains during the past 24 hours on the back of the Fed decision to raise rates and also improve their forward guidance. The US currency appreciated against the rest of the majors with the Euro and the Pound dropping to fresh lows as traders rushed to take advantage of Fed’s increased optimism over the domestic economy’s outlook.

However given the timing of the rate hike and the fact that market participants were prepared for it and positioned in a way to take full advantage of it we now need to focus our attention on their next moves as we approach the end of the year. In our previous reports we mentioned the possibility that even though the Fed would raise rates it could drive the US Dollar lower towards the final sessions of 2015.

We don’t necessarily believe that this is the most likely scenario but we think that it’s important to prepare our audience for such a development as well. We expect 2016 to be a good year for the US Dollar as investors will look to benefit from the divergence between the monetary policies of the Fed and the ECB which means that they will flock towards the Dollar. However the next 2 weeks might be their opportunity to bank their profits for the current year and approach the next one cash neutral so we need to be vigilant over a reversal against the Dollar.

For the time being though the Dollar remains in control over its major peers. The Euro dropped to 1.0800 yesterday and even though it corrected higher overnight the buck still is in the driver’s seat. This morning the currency is trading around the 1.0860 area slowly moving towards the 1.0900 resistance. As long as the Single currency remains below that level the bias will remain bearish but a possible move above could hint us on a further correction as investors could be closing their profitable pro-Dollar positions.

The Cable had an identical session with the Euro yesterday as it printed a new low at 1.4870 but over the course of the Asian session the currency pair moved back above the 1.4900 area. At this time we are watching the Cable trade around the 1.4940 level and as we mentioned above the bias remains bearish. The BoE will be the next bank to raise rates in 2016 but for the time being the Pound is on the defensive however we should always be vigilant for a scenario like we mentioned above for the Euro where investors look to take their profits off the table and drive the rate higher.