The US Dollar is lower today after worries of a default have been washed away.
The US Dollar has been trading sideways for some time now. Today’s move would put the bears in control if in the coming days they manage to push the dollar below $79.17.
Why was the dollar so resilient before the default dateline?
It is very confusing for those following events that affect the US Dollar. Prior to the default battle investors where happy to punish the US dollar whenever the Fed intervened and so, when the Fed announced plans to withdraw its financial stimulus as fear that with not support, the US economy will slow down.
During the government shut down in Washington and before the government reached an agreement on the debt ceiling, the dollar was supported because an agreement on the debt ceiling will be better for the US Dollar than a default.
And now that the default battle is over, the dollar is lower as fear that sooner or later the FED will withdraw its stimulus. Of course there are other factors like; USD reserves hold by other countries would be reduced after the debt ceiling will continue to pose a threat to the U.S economy. And most of all, expectation that the U.S GDP will fall in the next quarter thanks to the shutdown.
The US Dollar chart price is mixed; with short term indicators signalling a temporary retreat in prices. While longer term indicators are somehow in neutral territory.
In the Long Term
The US Dollar will remain in favour as there not other currency that would substitute or offer markets a point of reference against other currencies.
The current weakness in the US Dollar could be a buying opportunity once that it has bottomed and ready to push higher. The FED withdrawals of economic support could be welcomed by investor after all.