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Outlook 2017

U.S. Dollar Heading Into 2017 With A Full Head Of Bullish Steam

Editor's Note: Kitco News has officially launched its 2017 Outlook where we ask if this is the start of a new Raging Bull market. Be sure to catch all our coverage here, which includes gold forecasts, special technical reports and of course, our popular Invest Like The Experts Series. We will also be launching a new feature so be sure to stay tuned!

(Kitco News) - The U.S. dollar index is a basket of six major world currencies stacked up against the greenback. The USDX is a key "outside market" that has a daily impact on many other markets. Many major commodities and other products are priced in U.S. dollars on world markets. Thus, movements in the U.S. dollar index impact pricing of commodities and products for those world consumers using non-U.S. currency.

The dollar index scored a 13-year high in late-December, which is a bearish development for many raw commodity markets, including the precious metals.

However, heading into 2017, the appreciating U.S. currency could have a decreasing bearish impact on commodities. Reason: It's likely the coming new year will see generally better economic growth from the world's major industrialized countries. That means increased demand for raw commodities.

In years past, the U.S. dollar has been strong at the same time raw commodity prices have rallied.

Fundamentally, the U.S. dollar will also benefit from a likely continued tightening of Federal Reserve monetary policy (higher interest rates). And the U.S. economy is likely to be the leader on the expected upward trajectory in world economic growth in 2017.

Technically, the longer-term monthly continuation chart for nearby U.S. dollar index futures shows that price action the past couple months has produced a big and bullish upside "breakout" from a congestion area. The congestion area and the big run up that preceded the congestion area could also be called a bull flag or bullish pennant pattern on the monthly chart.

Either way, the upside breakout has bullish implications for the dollar index over the next couple years, including challenging the highs seen in the late 1990s.

By Jim Wyckoff, contributing to Kitco News; jwyckoff@kitco.com

 

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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