Interesting price action at these levels. Looks like we may continue to trade sideways for a bit, before a potential move to the upside. Let's see how this week plays out, and if the bulls can recapture key supports on the majors.
Nice bounce off yesterday's low around 92.46. Sitting near major long-term support still. I expect bearishness in risk assets heading into month end, so if US markets lose short-term support, given both the geo-political and economic climate, we might see a return of King Dollar sooner than we think...
@kowyoung7, Thanks for sharing! I agree, I think the dollar has found long-term support at these levels. As I mentioned, we may trade sideways for a brief period before we catch a bid. But, the return of King Dollar is inevitable based on what I'm seeing. Just my 2 cents.
@Golden_Oracle, Thanks for the comment! Different times, indeed. But, ZIRP for "years" is highly unlikely, when you consider the incredibly reckless monetary policy we're seeing at the end of this secular credit cycle. Credit cycles typically last 25 to 30 years, as you might know, and this one, which began in the 80's, is now ending, and hence the expansion is ending. Inflation, and more specifically, stagflation, is inevitable when the solution to too much debt, is to print GDP growth. Imo rates are going to rise next year, and inflation will be the fall guy. The FED's new metric and anything they say about it is also bull-shit. As far as I know, they haven't shed any light on the duration of the average inflation targeting metric (for a reason). When inflation runs hot (and it already is), according to Bank of America, based on their model, rates could rise as soon as next year. Further, the dollar will see upward pressure when asset prices show genuine weakness off the back of a lull in earnings (from an increase in debt servicing costs/availability of credit), and a rise in the risk free & savings rates. Maybe I'm wrong, my friend, and you're right. We'll find out soon enough. Thanks again for the comment!
@Hedge_Of_The_World, NP Hedge. We have very similar views. The only difference, I think, is the timeframe. I think we currently have more similarities with the mid 70s. In that scenario, inflation/stagflation was allowed to run for a while. The easy solution to our gargantuan debt problem, is to inflate. And inflate alot. And that will take time. I think the U.S. will be hampered by the virus for much longer than we expect. Asia and to some extend Europe, will be open and virus minimized much sooner than the U.S. U.S. GDP will be pressured under that scenario for a while. Asia will grow while the U.S. enters stagflation. I have a target of 2024-2025 for rates to start increasing.
@Golden_Oracle, Well said. I appreciate your perspective on this. Allowing inflation to run is definitely a possibility, and as you said, it's a question of when. Let's see how things shake up heading into the election and year end.
@Hedge_Of_The_World, you may want to consider a new scenario. Digital currencies backed by central banks and a digital version of Special Drawing rights taking over. In that scenario a universal basic income is guaranteed for at least a few months
@axelrodd, Thanks for the comment! That's a great point, and I absolutely agree. CBDC is being considered by major central banks all over the world. However, the question of when this might happen is key. The German CB is not convinced. Burkhard Balz, a board member on the central bank, recently said "This might lead to the structural disintermediation of the banking sector, and, as a consequence, could potentially dampen the provision of bank credit to the economy." He also mentioned, "I am not sure whether incentives could, in reality, prevent a digital bank run. Therefore, the technical implementation of CBDC would need to be thoroughly thought over and tested." I think the practicality of CBDC is evident, however, it appears to be something to be considered in the distant future, once adequate testing has taken place. Just my opinion. Thanks again for the comment, my friend, I appreciate it!
@Hedge_Of_The_World, This scenario has been in the works for nearly 10 years. Even mastercard brochures want cash banned and outlawed. Everyone from the bank of England to ConcordiaBV have made this possible in order to end corruption and move towards what Lynn forester de rothschild is coining, inclusive capitalism. Take a look at XRP by Silicon Valley's Ripple Labs for instance, more than 400 banks are already on board including bank of america and moneygram. We are more than ready for this scenario. The pandemic this year is the perfect excuse to take over and transition towards a one world supranational governance model
@axelrodd, Interesting points, thanks for sharing. As I said, I do agree but I think a blockchain based payment system based on a basket of fiat, such as those within the SDRs, is also likely, but the question, still, is when. If the power grid went down, for example, as we saw in parts of California recently, without physical currency or gold, no one would have access to funds. I just don't see that as a viable solution in the interim. Also, with quantum computing rendering encryption essentially moot, I don't see it happening soon. Just my opinion. Maybe I'm wrong.