Dollar Exchange Rate: Forecasters Predict Further Gains for the USD vs the Majors

Modified: Monday, 10 March 2014 22:22 GMT
Written by: Gary Howes

US dollar exchange rates have enjoyed a period of strength over the course of the past 24 hours with analysts forecasting further gains for the USD to come.

As we head towards the close of the London trading session we see the USD remains supreme:

The pound sterling to US dollar exchange rate is trading 0.56 pct lower at
1.2532
The euro dollar exchange rate (EUR/USD) is seen 0.56 pct lower at 1.3602.
The Australian dollar to US dollar (AUD/USD) is 0.5 pct down at 0.8923.
The US dollar to Canadian dollar (USD/CAD) is trading 0.1 pct lower at 1.0937. (We are witnessing a short-squeeze higher for CAD, more on this here).

NB: Our USD quotes are taken from the spot markets; your bank will subtract a discretionary spread when passing on their retail rate. However, an independent FX provider will guarantee to undercut your bank's offer and deliver you up to 5% more currency. Please learn more here.

US dollar strengthens across the board

Demand for the dollar continued to be underpinned after data released on Wednesday showed that U.S. producer price inflation rose at the strongest rate in six months in December.

Producer price inflation rose 0.4% last month, the biggest increase since June, recovering from a 0.1% decline in November and was 1.2% higher from a year earlier.

Core PPI was up 0.3% in December and rose 1.4% on a year-over year basis, compared to expectations for a monthly increase of 0.1% and an annual gain of 1.3%.

Forecasting further US dollar gains

US dollar exchange rates are forecasted to maintain a positive bias. Below are a number of technical viewpoints from those analysts we follow:

"The EUR/USD inched lower over the last 24 hours after failing to break conclusively above resistance at 1.3680 in yesterday’s early North American trade. Now, the pair is nearing the 1.3600 round handle, which may provide minor support in the short-term; however, if that level is broken, a stronger continuation down toward the recent lows at 1.3550 is likely." - Matt Weller at GFT.

"GBP/USD continues to consolidate just above the key low at 1.6338 (06/01/2014 low). We favour a further swing higher to retest near the 1.6600 region, before a more meaningful correction lower can be realised. Resistances can be found at 1.6466 (intraday high) and 1.6517." - Luc Luyet at MIG Bank.

"USD/JPY is resuming its strength bringing our focus on critical resistance at 105.75. A close above which would trigger further acceleration to 110.74. Support is at 103.91 ahead of 103.09." - UBS.

"USD/CAD extended gains to 1.0991. Trend and momentum indicators are solidly bullish suggesting further gains, yet solid offers cap the upside below 1.0980/1.1000 zone. The RSI stands at 75% giving signs of exhaustion. The loonie has been sold-off too fast in a too-short period of time. A short-term correction is expected back into the 30-day Bollinger bands (i.e. below the upper band currently at 1.0907). Traders are looking for interesting dip buying opportunities." - Swissquote Research.

"AUD/USD dips sharply, approaching the ascending support for the recent sideways market, meanwhile, the bearish move is overextended, and thus we look for a pullback before resuming the bearish bias for a possible retest of the ascending support. A break below support may signal further downside and the resumption of bearish trend." - ICN Financial.