Dollar remains strong - long term analysis
Updated
In line with macro developments such as record inflation and a decade long risk-on environment I see long term strength in the dollar. Its not a coincidence that when everyone is losing faith in fiat, the Federal Reserve (and the market) will start a bull run for the World's reserve currency. The Fed futures are pricing in 50 BPS hikes for the coming meetings, the ECB is playing with fire and seems scared to act in a fragile European market and above all has weak leadership. Later today we will know more about their policies but in anyway they are behind the Fed and the fed themselves is behind the market.
It was a big mistake to jump on the corona hype train and implement these severe restrictions along with monetary expansion.By doing so, central banks have no more backup plans and will need to tighten aggressively in order to keep inflation at record highs. Yes at the record highs, in or to create any form of deflation they will have to run rates higher for years to come. The Fed finally seems to understand the problem and is committed to aggressively implement rate hikes which has resulted in a strong dollar.
As you can on the weekly chart, the dollar is done trading inside its current range where its been in since 2015, a few drops towards macro support excluded. It has broken out and is about the retest the range as support, if succesful we have a dollar bull run on our hands. Market makers will run the narrative with a hawkish fed to mark up prices for (possibly) years to come. Not only is this an opportunity for them business wise but the Fed knows they need to somewhat get ahead of themselves in order built a margin for the next risk-on market. I would not be surprised to see the DXY run towards macro resistance somewhere between 2023 or 2025. Although the next FOMC meeting will be crucial to see if the Fed puts their money where there mouth is. For stocks and crypto this will mean a prolonged mark down phase is here. Valuations stayed relatively high and a lot of distribution has taken place. As a trader or investor it is wise to hedge yourself against any scenario (bullish or bearish), there's no reason for panic long term but approach the market with caution and do not be stuck to a single direction, whether its up or down. Patience will prevail.
It was a big mistake to jump on the corona hype train and implement these severe restrictions along with monetary expansion.By doing so, central banks have no more backup plans and will need to tighten aggressively in order to keep inflation at record highs. Yes at the record highs, in or to create any form of deflation they will have to run rates higher for years to come. The Fed finally seems to understand the problem and is committed to aggressively implement rate hikes which has resulted in a strong dollar.
As you can on the weekly chart, the dollar is done trading inside its current range where its been in since 2015, a few drops towards macro support excluded. It has broken out and is about the retest the range as support, if succesful we have a dollar bull run on our hands. Market makers will run the narrative with a hawkish fed to mark up prices for (possibly) years to come. Not only is this an opportunity for them business wise but the Fed knows they need to somewhat get ahead of themselves in order built a margin for the next risk-on market. I would not be surprised to see the DXY run towards macro resistance somewhere between 2023 or 2025. Although the next FOMC meeting will be crucial to see if the Fed puts their money where there mouth is. For stocks and crypto this will mean a prolonged mark down phase is here. Valuations stayed relatively high and a lot of distribution has taken place. As a trader or investor it is wise to hedge yourself against any scenario (bullish or bearish), there's no reason for panic long term but approach the market with caution and do not be stuck to a single direction, whether its up or down. Patience will prevail.
Note
So ECB remaining dovish, no hikes. 40% of the DXY basket is eur/usd so watch the DXY fly! ECB is actively trying to devalue their own currency making the EU market even weaker in the long term. Never seen such bad leadership with a central bank, Powell would be a blessing for Europe and not even that much of a fan of him although he’s navigating a very difficult situation. Its unbelievable what happens in Europe, do they want to go route of Japan? …Note
In case you didnt get it, a strong dollar is bad for BTC and crypto.Note
DXY even pumping hard as expected. Almost 3% since I posted which is a lot in forex. I expect a short correction next week with the FOMC, take out the longs and continue the trend up. May will be super interesting for all markets, crypto, stocks and commidities. I expect gold to break 2K$ in May.Note
DXY most bullish chart of the market: 107. You were warnee.Note
*warned
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