Tight Stop Loss for Long Term Trade
1:96 Risk Reward Ratio
Technical Speaking:
1. DXY reversed on long term support around 92-93
2. 36 Year Seasonality Chart suggests reversal usually happens on Aug. 2nd.
3. COT reports showing highly concentrated short positions from Speculators.
Fundamentally speaking:
1. There have been two dollar-bull-markets since 1960s. One took place from 1980 to 1985 with DXY moved from $84 to $159, and the other took place from 1994 to 2002 with DXY shot up from $84 to $119. Both bullish moves, in percentage terms, were 89% and 42% respectively. The current dollar trend has only moved 25%, from the low of $80 in 2011 to the recent high of $100. The magnitude is not at par with the past two bull markets, which indicates the next phase of DXY will be an accelerating hawkish move in the magnitude of at least another 20%. Now with DXY reversing at long term key resistance level, risk reward ratio is highly favorable.
2. Trump's policies are very protectionist friendly, whether it's the breakup of The Trans-Pacific Partnership (TPP) or some renegotiation of other trade deals. Trump’s protectionist policies also include – exiting the North American Free Trade Agreement, if it isn’t re-negotiated and labelling China a currency manipulator. The world is dollar starved. There's a shortage of offshore dollar funding and the euro dollar market. With Trump starting his protectionist policies, it means less dollars flow into the global system because they're doing less trade with the U.S. and not enough dollars to circulate for all the dollar borrowers. The dollar is rising because there's a perceived lack of dollars in the outside system. It is seen in the London Bank Interbank Offered Rate (LIBOR) market, which has been rising along with the risk of U.S. interest rates rising. But the other reason it's been rising is because monies keep getting taken out of the offshore funding market and being put onshore in the U.S.
3. The Bank for International Settlements (BIS) have been talking about this $10 trillion shortfall of dollars (BIS Quarterly Review, September 2016) out there where people have borrowed dollars, and as the dollar rises they're scrambling to pay it back or secure new funding. But the funding costs are going up as well, creating a real problem for people having to pile into dollars.
1:96 Risk Reward Ratio
Technical Speaking:
1. DXY reversed on long term support around 92-93
2. 36 Year Seasonality Chart suggests reversal usually happens on Aug. 2nd.
3. COT reports showing highly concentrated short positions from Speculators.
Fundamentally speaking:
1. There have been two dollar-bull-markets since 1960s. One took place from 1980 to 1985 with DXY moved from $84 to $159, and the other took place from 1994 to 2002 with DXY shot up from $84 to $119. Both bullish moves, in percentage terms, were 89% and 42% respectively. The current dollar trend has only moved 25%, from the low of $80 in 2011 to the recent high of $100. The magnitude is not at par with the past two bull markets, which indicates the next phase of DXY will be an accelerating hawkish move in the magnitude of at least another 20%. Now with DXY reversing at long term key resistance level, risk reward ratio is highly favorable.
2. Trump's policies are very protectionist friendly, whether it's the breakup of The Trans-Pacific Partnership (TPP) or some renegotiation of other trade deals. Trump’s protectionist policies also include – exiting the North American Free Trade Agreement, if it isn’t re-negotiated and labelling China a currency manipulator. The world is dollar starved. There's a shortage of offshore dollar funding and the euro dollar market. With Trump starting his protectionist policies, it means less dollars flow into the global system because they're doing less trade with the U.S. and not enough dollars to circulate for all the dollar borrowers. The dollar is rising because there's a perceived lack of dollars in the outside system. It is seen in the London Bank Interbank Offered Rate (LIBOR) market, which has been rising along with the risk of U.S. interest rates rising. But the other reason it's been rising is because monies keep getting taken out of the offshore funding market and being put onshore in the U.S.
3. The Bank for International Settlements (BIS) have been talking about this $10 trillion shortfall of dollars (BIS Quarterly Review, September 2016) out there where people have borrowed dollars, and as the dollar rises they're scrambling to pay it back or secure new funding. But the funding costs are going up as well, creating a real problem for people having to pile into dollars.