The DXY appears to be picking up some steam indicating BITCOIN could be looking at a move to the downside in the near future.
You might be thinking, “wait”.. How is the dollar pumping after the FED increased the MONEY SUPPLY by over 30% in the last 12 months?”.
I asked the same questions, did a little digging -and the reasons I found are pretty interesting and incredibly bullish for bitcoin.
REASON #1: HIGHER TREASURY YIELDS
This week's US dollar move coincided with a 20 basis point move in 10-year yields higher to 1.115%. That boosts yield differentials in the US dollar's favor on many fronts. I think some of the move this week was on bond hedges and I'm curious to see how the dollar performs when yields stabilize, but the rates market is a spot to watch very closely.
The US FED RESERVE
The dollar will go wherever the Fed does, and the Fed will follow inflation. Already the talk from the central bank is changing. Less than a month ago they were contemplating more QE or lengthening the average maturity of purchases. This week, Clarida and Evans were talking about timelines for tapering bond purchases.
They've been strident in forecasting no rate rate hikes into 2024 but that always comes with a caveat about inflation. They have been talking tough about allowing inflation to run hot and looking through temporary climbs but when they're seeing 3% year-over-year inflation, will they hit the panic button? Their track record for consistency isn't inspiring.
TECHNICALS:
I prefer the Bloomberg Dollar Index to the DXY because it's trade-weighted. As you can see here, it's challenging the 2018 low after a one-way 14% move since the March high.
That's a big move.
I don't think this is a base to build a multi-year dollar bull market but at the very least there's a case for a bounce. If the DXY is your bag, the chart isn't significantly different, with the latest bounce coming from within 1% of the 2018 low.
Another spot to watch is USD/JPY. There's a downtrend from the March highs that's being challenged. If it breaks, it would be a stronger indication of a retracement phase.
DOLLAR POSITIONING
The consensus has a habit of being wrong. Bank of America's December institutional investor survey highlighted that selling the dollar was the second most-crowded trade. The CFTC FX data also shows a US$30-billion bet in the futures market against the dollar with euro and yen longs particularly crowded.
You might be thinking, “wait”.. How is the dollar pumping after the FED increased the MONEY SUPPLY by over 30% in the last 12 months?”.
I asked the same questions, did a little digging -and the reasons I found are pretty interesting and incredibly bullish for bitcoin.
REASON #1: HIGHER TREASURY YIELDS
This week's US dollar move coincided with a 20 basis point move in 10-year yields higher to 1.115%. That boosts yield differentials in the US dollar's favor on many fronts. I think some of the move this week was on bond hedges and I'm curious to see how the dollar performs when yields stabilize, but the rates market is a spot to watch very closely.
The US FED RESERVE
The dollar will go wherever the Fed does, and the Fed will follow inflation. Already the talk from the central bank is changing. Less than a month ago they were contemplating more QE or lengthening the average maturity of purchases. This week, Clarida and Evans were talking about timelines for tapering bond purchases.
They've been strident in forecasting no rate rate hikes into 2024 but that always comes with a caveat about inflation. They have been talking tough about allowing inflation to run hot and looking through temporary climbs but when they're seeing 3% year-over-year inflation, will they hit the panic button? Their track record for consistency isn't inspiring.
TECHNICALS:
I prefer the Bloomberg Dollar Index to the DXY because it's trade-weighted. As you can see here, it's challenging the 2018 low after a one-way 14% move since the March high.
That's a big move.
I don't think this is a base to build a multi-year dollar bull market but at the very least there's a case for a bounce. If the DXY is your bag, the chart isn't significantly different, with the latest bounce coming from within 1% of the 2018 low.
Another spot to watch is USD/JPY. There's a downtrend from the March highs that's being challenged. If it breaks, it would be a stronger indication of a retracement phase.
DOLLAR POSITIONING
The consensus has a habit of being wrong. Bank of America's December institutional investor survey highlighted that selling the dollar was the second most-crowded trade. The CFTC FX data also shows a US$30-billion bet in the futures market against the dollar with euro and yen longs particularly crowded.
