abel11

DXY Analysis ahead of the announcement of the stimulus.

Long
TVC:DXY   U.S. Dollar Currency Index
President-elect Joe Biden will make a speech later today to outline plans for a huge fiscal stimulus bill to help the US economy recover from the pandemic.

Reports suggest the new fiscal stimulus could be worth anywhere between $1.3 trillion to $2 trillion and include direct payments of up to $2000 to hard-hit citizens . A $900 billion package was recently agreed by Democrats and Republicans, but Biden has described this as a down payment ahead of his inauguration. That included direct payments of $600 to citizens after Democrats were unsuccessful in their attempts to raise the figure.

Having now won control of Congress following the Georgia run-off races, Biden is expected to push ahead with a sweep of Democrat policies, but he is keen to win the backing of Republicans to build on the bipartisan mood that has struck both parties during Donald Trump’s final days in office. That may dissuade Biden from trying to ram through too much straight away and approach it in phases to garner the support of both Democrats and Republicans. He is expected to focus solely on coronavirus-relief measures at first and not to mix it with other policies to do with matters like healthcare or infrastructure spending, which he is expected to pursue later.

On top of larger cheques, reports suggest Biden could look to increase support for minority groups and billions of new funds to accelerate the country’s vaccination programme. State and local governments, which also fund the likes of schools and hospitals, are also set to receive more money.

Impact On The Economy

Biden’s push for a big new stimulus package comes amid a rapid deterioration of the economy under the strain of a third wave of the coronavirus. The economy shed 140,000 jobs in December, a steep decline just as U.S. covid-19 deaths hit an all-time high.

Biden is also likely to push for a larger legislative effort later in 2021 after the initial stimulus package. That effort is expected to focus on spending trillions of dollars on infrastructure and clean-energy jobs. The former vice president additionally has pushed for significant overhauls to America’s health-care system, something that could also be wrapped into legislation later in the year.

Biden is attempting to bring back hope in the economy, hence winning investors confidence.

In the markets, the bigger the proposal’s price tag, the better for equities and the U.S. dollar. There has been a paradigm shift lately in dollar dynamics, where promises of astronomical spending now boost the reserve currency as the rosier outlook for growth overshadows deficit concerns. If all the spending supercharges the economy, the Fed could reign in its generosity.

Comments

I had a question, why smaller stimulus before was so bearish which hammer the dollar so hard while a huge stimulus like this one suddenly become bullish? Isn't bigger stimulus mean printing more paper money out of thin air?
+2 Reply
abel11 vitreloy
@vitreloy, you are right, but it depends on how they inject it into the economy
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Interesting, do you think there is a correlation between BTC and DXY, could be DXY up BTC down again?

+2 Reply
@wbto, because of the dollar in both dxy and btcusd. So if dollar is the driving factor expect an inverse correlation in dxy and btcusd. thank you
Reply
wbto abel11
@abel11, Thanks bro.
Reply
@wbto, welcome
Reply
Great job man, let’s see if the price will break that trendline, I’m so curious 😁
+1 Reply
abel11 FXtrades-gp
@FXtrades-gp, lets see
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we have a dead line for this wedge or triangle, it is very possible we will reach it then break out.
+1 Reply
Nice chart we are probably going to hit the 2018 support line 88.253 or even false break it before any bounce back. I like your simple ideas to the point. wish you the best. here is my perspective on DXY.

+1 Reply
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