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Dollar strength at the daily view.
Currently, shorting the dollar and longing gold are at the highest level in nearly a decade. FOMOers and hedge funds have overcrowded into those two trades.
As a result, the dollar had a short-covering rally to punish excessive greed. The bigger issue is the dollar is still closing below its 11-year-old channel.
If the dollar doesn't reclaim that channel soon, then Japan and Germany may continue their panic.
Why? Japan and Germany are export-based economies. They need their currency to be weaker in order to be competitive to sell their products. When the dollar strengthened, that eased the panic within the Nikkei and DAX .
This is why currency is important. Most traders neglect its underlying power and get confused as to why the market moves the way it does.
Currently, shorting the dollar and longing gold are at the highest level in nearly a decade. FOMOers and hedge funds have overcrowded into those two trades.
As a result, the dollar had a short-covering rally to punish excessive greed. The bigger issue is the dollar is still closing below its 11-year-old channel.
If the dollar doesn't reclaim that channel soon, then Japan and Germany may continue their panic.
Why? Japan and Germany are export-based economies. They need their currency to be weaker in order to be competitive to sell their products. When the dollar strengthened, that eased the panic within the Nikkei and DAX .
This is why currency is important. Most traders neglect its underlying power and get confused as to why the market moves the way it does.
Comment:
I just found a downward channel for the DXY. I'll post it tomorrow. It looks like there is more to the bounce left in the short-term.