USD outlook: The DJT wrecking ball+1 is gaining momentumHello traders
First of all, best of luck for yet another challenging week ahead.
I usually keep my charts simple in appearance but in this case I toyed around with the canvas to illustrate the direction of these three USD instruments. It also gave me the opportunity to simmer down before I start writing my next Idea on EUR/USD.
The charts tell the story. The FOMC's 50 bps rate cut on September 18th 2024 caused considerable consternation in the markets. It was a turning point for all three USD instruments because it was an implicit acknowledgement that the FOMC saw some economic hardship ahead. The DXY was the outlier because it zoomed higher because of the FOMC projections for future rate cuts but more importantly because it was still the highest rate in the G7 other than the UK.
The USD 10Y T-bill and USD 10Y yield tell a different story. The decrease and breakdown in the yield shows less confidence in the economy moving forward.
* Investopedia.com has good information about the inverse relationship between the the cost of a bond and the yield, for anyone who wants to brush up on that topic.
In my opinion, DJT+1 and his/their tariff threats and chaotic administration decisions(think firing Federal employees safeguarding our nuclear arsenal, a threat to abolish the Dept. of Education etc. etc. etc.) are reflected in these charts. He is getting his wish by slightly devaluing the USD but ultimately his economic policies are going to lead to more economic pain for American consumers by increasing inflation. Canada and Mexico, our biggest trade partners have made it clear, they will retaliate with equal sized tariffs. Load up on the guacamole while you can. :)) I do not foresee the FOMC raising rates but they will also not be cutting either if and when inflation raises it's ugly head again.
We all know DJT's casual relationship with facts and his penchant to brag about his exceptional "Common Sense" that also explained the tragic death of 67 individuals in the recent Washington D.C. plane crash. Please form your own opinions on him also blaming it on DEI initiatives. I am staying out of that minefield and also do not have enough time or space to deal with any broken individual's misogyny and racial hatred. Bottom line, the USA does not have a leader who can instill confidence in our future or the International order and marketplace. He is aided by his +1, Musk, who somehow believe that the Silicon Valley mantra of "move fast and break things" will work in Government and in the international arena.
I do no think so. These two bulls in the china shop will turn around sooner than later and deny that they are responsible for the International and Domestic wreckage, chaos and damage that they have caused.
Only time will tell, though. I put my money on the mid terms. And once again, I am a registered Independent voter in this beautiful land of the USA, which despite all the problems and issues, is still one of the best places in the world to live.
Thanks for reading and feel free to share your opinion either way.