We're at a pretty critical point in the DXY around 107 - 109. If the USD is actually in a net downtrend this is where we'd be likely to see that picking up. We're into the 76 fib of the most recent drop.
Anyone who's a Forex trader has to be alert to potential for a turn here in the USD. Being a long term USD bull I've been a bit more cagy recently. After DXY hitting my first big target for the upside.
But what if it goes the other way? What if the 5 yr range breakout turns into a legit USD bull move?
If we can break the 76 levels of the recent swing fibs set then a lot of the time we see price heading to the 61.8 and 76 fibs of the larger fibs set. This would be an explosive move for the USD. Taking it up 30%. Maybe some pull backs and then ultimately up to 40% from where we are today. This would be where the next big test for the USD would be (And if we get to this level you can expect to see me positioning for a USD crash if there's dollar mania in the air, which there would be).
Moves of 30 - 40% do not seem that much in this brave new world of markets where a stock can move that in a day ... but it's a lot for currencies. The USD making this bubble move would cause chaos. Importing and exporting business with the USD would be heavily affected. Emerging markets would hurt progressively more. Risk assets and classic hedge assets would be under consistent pressure. If the next bubble is the USD, that's not going to be fun for most other things.
If the "Cash is King" scenario comes to pass, everything else will be(At least act as if) trash.
A USD bubble would be the biggest risk/opportunity of our times. I also think a USD bubble would be followed by a USD crash. Whenever I talk fundies it's armchair economics (Not to be taken seriously and not well researched - I do my work with charts) but it'd seem the obvious mechanism for a USD crash to set up would be need to weaken the USD to do more exporting business to increase the GDP in the event of a strong sell off in US stocks and the effect that'd have on the economy.
If I was to guess, I'd say the USD bubble would be popped by the FED. And the USD crash (Which people have spoken about for the whole 10 yrs I've been interested in trading and USD has uptrended that whole time) might really be on the cards.
What a real USD crash would imply for the world has a lot more questions to it - but I'm a simple man, if something bubbles it will crash. And I'll look for the warning signs and trade accordingly.
Anyone who's a Forex trader has to be alert to potential for a turn here in the USD. Being a long term USD bull I've been a bit more cagy recently. After DXY hitting my first big target for the upside.
But what if it goes the other way? What if the 5 yr range breakout turns into a legit USD bull move?
If we can break the 76 levels of the recent swing fibs set then a lot of the time we see price heading to the 61.8 and 76 fibs of the larger fibs set. This would be an explosive move for the USD. Taking it up 30%. Maybe some pull backs and then ultimately up to 40% from where we are today. This would be where the next big test for the USD would be (And if we get to this level you can expect to see me positioning for a USD crash if there's dollar mania in the air, which there would be).
Moves of 30 - 40% do not seem that much in this brave new world of markets where a stock can move that in a day ... but it's a lot for currencies. The USD making this bubble move would cause chaos. Importing and exporting business with the USD would be heavily affected. Emerging markets would hurt progressively more. Risk assets and classic hedge assets would be under consistent pressure. If the next bubble is the USD, that's not going to be fun for most other things.
If the "Cash is King" scenario comes to pass, everything else will be(At least act as if) trash.
A USD bubble would be the biggest risk/opportunity of our times. I also think a USD bubble would be followed by a USD crash. Whenever I talk fundies it's armchair economics (Not to be taken seriously and not well researched - I do my work with charts) but it'd seem the obvious mechanism for a USD crash to set up would be need to weaken the USD to do more exporting business to increase the GDP in the event of a strong sell off in US stocks and the effect that'd have on the economy.
If I was to guess, I'd say the USD bubble would be popped by the FED. And the USD crash (Which people have spoken about for the whole 10 yrs I've been interested in trading and USD has uptrended that whole time) might really be on the cards.
What a real USD crash would imply for the world has a lot more questions to it - but I'm a simple man, if something bubbles it will crash. And I'll look for the warning signs and trade accordingly.