$DXY About to Break Out?
I mentioned recently on twitter that I am long USDJPY.
Not much to say about the dollar, other than it looks like it wants to break out to the upside. Additionally, the macroeconomic tailwinds support a bullish dollar thesis in a couple of ways:
1. The Federal Reserve has been very transparent about their intention to continue to raise interest rates through 2022. Increasing interest rates make the dollar more attractive via the risk-free rate of return.
2. The war in Ukraine: as an added measure towards defeating Russia's war machine, raising interest rates in the US makes exporting dollars to Russia that much less attractive. When I say "exporting dollars to Russia", I am describing a situation in which other sovereign countries who might otherwise be willing to engage in trade with Russia, can now look to the risk free rate of return in dollar-denominated asset classes... so, why would you trade with Russia when you can buy US bonds that pay interest and allow you to stabilize your currency and rebalance your trade policy?
3. Oil prices continue to rise. Russia may pretend to be in control of the market for crude, but so far - this is empty dictatorial rhetoric.
4. Bitcoin continues to deteriorate ( I identified the top in October 2021 ). A stronger dollar, resulting from real world economic conditions, will continue to put adverse pressure on Bitcoin and cryptos alike.
last, I am now a little unsure on stocks overall. I am *guessing* stocks will continue to drift sideways for now.
God bless,
-Chief
Not much to say about the dollar, other than it looks like it wants to break out to the upside. Additionally, the macroeconomic tailwinds support a bullish dollar thesis in a couple of ways:
1. The Federal Reserve has been very transparent about their intention to continue to raise interest rates through 2022. Increasing interest rates make the dollar more attractive via the risk-free rate of return.
2. The war in Ukraine: as an added measure towards defeating Russia's war machine, raising interest rates in the US makes exporting dollars to Russia that much less attractive. When I say "exporting dollars to Russia", I am describing a situation in which other sovereign countries who might otherwise be willing to engage in trade with Russia, can now look to the risk free rate of return in dollar-denominated asset classes... so, why would you trade with Russia when you can buy US bonds that pay interest and allow you to stabilize your currency and rebalance your trade policy?
3. Oil prices continue to rise. Russia may pretend to be in control of the market for crude, but so far - this is empty dictatorial rhetoric.
4. Bitcoin continues to deteriorate ( I identified the top in October 2021 ). A stronger dollar, resulting from real world economic conditions, will continue to put adverse pressure on Bitcoin and cryptos alike.
last, I am now a little unsure on stocks overall. I am *guessing* stocks will continue to drift sideways for now.
God bless,
-Chief
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