Dollar Strength Broke Its 9 Year Support 7/27/2020
This is the dollar strength (DXY) at the weekly view.
The dollar is tanking faster than my faith in humanity...
The dollar finally broke its long-term uptrend support (blue line) that saved it since mid-2011. Why did this support stem from 2011? 2011 was when the Federal Reserve was executing Quantitative Easing III (money printing). After it finished, the dollar started its uptrend support.
Now the dollar is trying to find support among one of those green lines. Those green lines are long-term supports that stem from several years before.
What does this mean? Well, if you look at gold, silver, and cryptocurrency, that's why they have been rising.
When "cash is trash," traders and investors are less willing to sell their equity or commodity assets for a weakening currency. Commodities and other currencies will also rise exponentially as well. So, this is great if you were already positioned in the commodities.
That said, the long-term effects may be more devastating. If the dollar weakens too much, then imported goods would cost a lot more in the US. There is already an inflation to wage gap that was growing for 50 years. Wages grow about 2-3% while inflation averages at 3.22%.
From a trading perspective, there may be two scenarios. Scenario A is when the dollar doesn't find support. If you do sell your commodities or FOREX currency, then your cash will still lose its purchasing power over time. Scenario B is a much better scenario for a trader. That's if the dollar bounces hard. If a trader sells his/her gold/silver or currency while the dollar is weak, then their profits will strengthen as the dollar bounces from support.
If the dollar bounces hard, then we may bring back volatility into the equity markets as well. Right now, opportunities are quite limited since prices are getting pretty lofty. The best opportunities arise when volatility and fear comes back into the market. That's when the best stocks are the best prices. That's why I always say volatility is opportunity.
The dollar is tanking faster than my faith in humanity...
The dollar finally broke its long-term uptrend support (blue line) that saved it since mid-2011. Why did this support stem from 2011? 2011 was when the Federal Reserve was executing Quantitative Easing III (money printing). After it finished, the dollar started its uptrend support.
Now the dollar is trying to find support among one of those green lines. Those green lines are long-term supports that stem from several years before.
What does this mean? Well, if you look at gold, silver, and cryptocurrency, that's why they have been rising.
When "cash is trash," traders and investors are less willing to sell their equity or commodity assets for a weakening currency. Commodities and other currencies will also rise exponentially as well. So, this is great if you were already positioned in the commodities.
That said, the long-term effects may be more devastating. If the dollar weakens too much, then imported goods would cost a lot more in the US. There is already an inflation to wage gap that was growing for 50 years. Wages grow about 2-3% while inflation averages at 3.22%.
From a trading perspective, there may be two scenarios. Scenario A is when the dollar doesn't find support. If you do sell your commodities or FOREX currency, then your cash will still lose its purchasing power over time. Scenario B is a much better scenario for a trader. That's if the dollar bounces hard. If a trader sells his/her gold/silver or currency while the dollar is weak, then their profits will strengthen as the dollar bounces from support.
If the dollar bounces hard, then we may bring back volatility into the equity markets as well. Right now, opportunities are quite limited since prices are getting pretty lofty. The best opportunities arise when volatility and fear comes back into the market. That's when the best stocks are the best prices. That's why I always say volatility is opportunity.
כתב ויתור
המידע והפרסומים אינם אמורים להיות, ואינם מהווים, עצות פיננסיות, השקעות, מסחר או סוגים אחרים של עצות או המלצות שסופקו או מאושרים על ידי TradingView. קרא עוד בתנאים וההגבלות.
כתב ויתור
המידע והפרסומים אינם אמורים להיות, ואינם מהווים, עצות פיננסיות, השקעות, מסחר או סוגים אחרים של עצות או המלצות שסופקו או מאושרים על ידי TradingView. קרא עוד בתנאים וההגבלות.