The US Dollar Pulls Back From Resistance Test: AUD/USD, GBP/USD, and USD/CAD. This is a reversal that is being triggered by the rise in oil prices. Oil has been the catalyst for the strength of the dollar and this just highlights how the price of oil can trigger the weak dollar to show weakness. This article will explain why the US Dollar is facing this level at present.
Oil prices have risen from less than $100 per barrel to more than $110 and is now being priced at well over $120. The fall in the price of oil and other commodities has encouraged many investors to invest in dollar funds. These funds come with more flexibility and allow more financial instruments to be traded.
Oil traders in the UK, Canada, Australia, and the European Union are using this type of fund and are finding it very effective in investing in oil and other commodities. The low dollar and falling commodity prices have seen a surge in the value of these dollar funds as well.
Lower oil prices are now making the dollar weaker and there is no immediate relief in sight. Even though the currency has been declining, there is still a large amount of the supply on hand. This means that the US Dollar is not yet going to fall.
What happens when the oil supply starts to run out? Once the supply runs out and prices begin to rise, there will be a rapid decline in the US Dollar. At this point, traders will look for other areas to put their funds into, especially with oil prices at record highs.
As the future commodities are not cheap enough to support an appreciating US Dollar, there is little or no demand for these future commodities at this time. Therefore, this means that future investment will become very difficult to find.
An appreciation of the dollar is considered as a good thing because of the possibility of high profits in the future. Investors who are hedging against currencies will enjoy the benefits. If you are thinking about hedging, make sure you know what your risk profile is, and also know what to expect in the long run.
The current economic weakness makes it harder for businesses to obtain financing. This means that they will not be able to carry out all of their planned projects and will have to cut back or lay off employees. This will lead to a decline in sales and profits, which will lead to further decline in the currency.
As the US Dollar falls, the profit margin of oil companies will be affected. This will lead to the global economy being hit very hard.
People who are considering hedging should not overlook the fact that oil is likely to be very cheap in the future. This means that the currency will see strong demand and thus will be strong in the future.
At this point, it is obvious that if the dollar rises, there will be a strong rally in the currency. There is no guarantee of this however, as there will still be plenty of oil left in the future. and even if the oil supply continues to run out, the dollar will still appreciate.