Dollar Week - This can be Epic

Hi everyone,

i ended up posting more about crypto simply because that's what you guys mostly ask for but this is DOLLAR WEEK now.

It's been a great run for the dollar but this could be coming to a reality check next.

The price of the USD is correlated and affects major assets:

- Other currencies
- Gold
- Oil
- Stocks
- and Bitcoin too

Let's start with Oil:
Oil Quoted in Dollars
Crude oil is quoted in U.S. dollars (USD). Countries that import oil pay for it in the greenback. Similarly, those that export the commodity receive payment in USD. This system dates back to the early 1970s after the collapse of the Bretton Woods gold standard. This period saw the rise of the petrodollar system, which promoted the U.S. dollar's rise as the world's reserve currency. Oil producers and purchasers use this system to trade in the commodity in U.S. dollars.

Each uptick and downtick in the dollar or in the price of the commodity generates an immediate realignment between the greenback and numerous forex crosses. These movements are less correlated in nations without significant crude oil reserves, like Japan, and more correlated in nations that have significant reserves like Canada, Russia, and Brazil

👉 There's also crude oil’s significant contribution to inflationary and deflationary pressures that intensifies these interrelationships during strongly trending periods—both to the upside and to the downside.

Gold and Silver:
As a rule, when the value of the dollar increases relative to other currencies worldwide, the price of gold tends to fall in U.S. dollar terms. Very straight forward invesrsely correlated. Not much to say, metals could be on the spotlight again.

Stocks:
This is way more complicated, you can say stocks go up more likely when dollar rises but the right way to look at it is this: Portfolios should adapt their diversification as other stocks can do better on a higher (or lower) dollar.
Expensive dollar doesn't help US exports, start with that thought.
Companies that rely substantially on foreign revenue and international exports stand to do very well if the U.S. dollar depreciates in value because they get more U.S. dollars when they convert the foreign cash their products bring in.

Bitcoin:
Not going to focus on that today. BTC more correlated to Nasdaq nowdays and not with the USD.


Is the dollar going to drop or rise?

Most likely correct at resistance i would say. Which is time to look at trading some traditional assets (eurusd, gbpusd, oil, gold, silver).

This will be a very interesting week and I have a feeling that the Preliminary GDP this week might play a role

One Love,

The FXPROFESSOR

PS. expensive dollar most likely puts a lot of pressure on other nations economies depending on buying with petrodollar.