The strength of the US Dollar has gathered steam over the past few days, with several trades “long USD” already paying well. I don’t imagine this to be your average “run of the mill” type move here – so I feel it worthy of further discussion / analysis.
The US Dollar will most certainly be moving lower in the “not so distant future”, but we trade what we’ve got in front of us so……
In looking to line up these “technicals” with some broader “intermarket analysis” we’ve got to consider that U.S equities have made some pretty huge gains since January of this year , as USD has more or less gone “up the mountain and back down the other side” – now at exactly the same level around 79.00.
With an impending correction “upward” in USD it would make sense to “finally see equities correct lower” ( if that’s at all possible considering the Fed’s POMO) and unfortunately for many – see gold and the precious metals correct lower as well.
Looking at forex markets it’s obvious the “opposite reaction” of a much stronger US Dollar will equate to a weaker EUR as well GBP and CHF. I would also expect the commodity currencies to correct lower as well, but considering that they’ve already fallen considerably – my focus would be on the Euro type pairs.
So that’s what I’m running with over the next few days – looking to “inch in” to many trades with a “risk off” vibe, and continued strength in the dreaded U.S Dollar.
Kong Fascinating article mate. Does the world spin round the strength of the $?
If yes – incredibly worrying fact.
Unfortunately as the world’s reserve currency – yes…..with around 85% of global trade / currency exchange “involving” USD.
You start to get the picture when you consider that the global commodities markets are “priced in USD” so…anyone and everyone “globally” is subject to exchange rates in USD when they go to buy oil, soy , corn , steel , gold , etc…..
This is changing quite quickly now as many countries are “attempting” to trade outside USD – but it will take time.
You can now understand how important this is to the U.S….although, considering the current government actions you’d hardly believe it.
The entire planet is moving away from U.S Dollars like the plauge…as the writing is clearly on the wall.
Also consider that for every “tiny little point” that USD rises, the U.S debt load / interest owed on outstanding debt balloons another billion er so annually – as the debt / interst payments to bond holders is “USD denominated”.
The Fed’s relentless assault on USD ( printing and devaluing at an alarming rate ) has much further reaching goals than to “help the American economy” as we clearly see – it hasn’t done a thing short of inflating stock prices.
Kong, I’m sorry the above does not make sense to me. The interest payments might become less as the USD strengthens vs. the currency of the debt buyers, but how does this change the interest owed? (What am I missing?)
Hey Kong, great article. Thanks man.
You would think we should finally be ready for an intermediate correction which should last a few weeks or more. Been quite a long time since the last intermediate correction. Lots of things like spx technical structure, positioning of the dollar, rotation out of momentum stocks and into grandpa stocks, record margin debt, time since last intermediate correction, macro fundamentals, declining volume, blah blah, say that this one should be substantial. I’m keeping an open mind to a multi-week correction and corresponding dollar rally…that being said I’m also keeping an open mind to BEING WRONG haha….but I kinda doubt it.
All that crap being said I’m getting ready to add to USD longs and ES short positions tomorrow or later tonight……and getting ready to get hammered tomorrow night because it is Halloween! My favorite night of the year haha.
Enjoy the night, bro
Would like to see a stronger yen tonight or tomorrow morning as well. Would like to throw yen longs in the mix. Looks like the yen is about to rally again but I’d like to see more momentum.
Waiting on stronger Yen as well but….where is it??
Surprised that it’s not popped here already.
Regarding the yen, since risk tops are supposed to be the happiest place on the planet we might not see yen activity until stock holders start to feel more heat from an increase in selling. Can’t decide if I believe in that or not
No no…..you’ve got it….
In fact it’s equally true of “actual USD strength” as thus far….we’ve really not seen a “true” move towards safety.
It’s 100% fair to say that the “ultimate risk barometer” being U.S equities will need to show some real weakness in order for us to get the ripple effect.
Hey sorry that was JSkogs
Ya I know.
If you’re having any trouble with the site / posting / comments whatever – please let me know.
OK thanks but in this case it was just me being a moron.
Sweet. Good post, as always. Do you see this USD strengh holding until the year end?
It’s tough to imagine “Xmas” rolling around without the boys in Washington “doin there thing” so…….
I’d see November / early December as a reasonable time frame for a lil “risk off” type action.
Looking at USD moving higher thru the next couple weeks…then likely increased QE etc…and further implosion.
Thanks for taking the time to reply. I’ll trade accordingly!