DXY to $93

23 jul 2020

Due to the FED's unprecedented actions to help backstop a depression caused by a forced governmental economic lockdown the USD is losing purchasing power rapidly. Sure, people will argue that due to the global sovereign demand of USD relative to other global currencies, that there is still some relative strength. The thing is, the FED has taken the most aggressive action in comparison to every other central bank in the world at the moment. Currently, we are in a deflationary environment due to a simultaneous supply & demand shock. Why does this matter? If the USD were to remain elevated, this would hinder US exports due to currency conversions (foreign firms' margins decrease). So to maintain and/or increase global import/export trends, a weaker USD is a benefit for the United States from a supply/demand perspective. China knows this is the case due to global FX markets, look at the price of the Yuan since September 3, 2019. Their government caps levels they want their currency at, and have been reportedly called out for manipulating their currency via their central bank. Not only is it a matter of maintaining economic growth in the United States, it's a matter of maintaining global currency demand away from China.

31 jul 2020

Nota

$93 target hit. Key levels to keep an eye on is $91.50 and $94.50. I anticipate a bounce back towards $94.50 before a further dip lower towards $91.50. This anticipation in my view is an outcome of profit taking in red hot sectors, US benefits ending for evictions, and the uncertainty behind the stimulus that is being negotiated in the white house between the Democrats and Republicans.