Despite starting strong at the beginning of the year, the US dollar currency depreciation has been gradual. The US dollar index (DXY) even dropped below 92, a price level has never seen since 2015. All this even as the FED is trying to tighten monetary policy through raising interest rates. The problem is that there has been increasing skepticism over the US administration’s ability to fulfill its agenda. Besides, the US president himself called the US dollar ‘too strong’ and unable to compete against other major currencies in trade.
There has been a recent retracement, following plans to slash corporate tax down to 20% from 35%, but the major undermining factors remain. The technical analysis indicates that the 94 level of the DXY could act as a resistance level since the DXY has had trouble breaking through it. Additionally, it is not only the US dollar that is tightening monetary policies, as other central banks are getting more hawkish. Given the current environment, the US dollar is still largely overvalued, and currency depreciation can be expected through 2018.