FxWirePro: Dollar index likely to slide further

The dollar index, which has struggled this year and more so this year is likely to remain wobble and decline further.

U.S. Federal Reserve has projected three more rate hikes in 2018 after hiking interest rates three times in 2017. The market is already pricing two rate hikes in 2018; one in March and one in September and pricing the third hike in December 2018 with 45.7 percent probability. So there isn’t much that dollar could find support from in terms of a rate hike.

The dollar’s weakness came despite the following factors,

• The European Central Bank will be purchasing €270 billion worth of European debt in an extended asset purchase program until September this year.
   
• Europe’s biggest powerhouse Germany is still suffering from a political crisis. No government has been formed since the election in September.

This basically indicates the level of weakness I the green buck.

Our calculations suggest that the dollar index, which is currently trading at 92, is likely to decline further by as much as 2 percent and test crucial support level around 90 area.