The U.S. Dollar is on the cusp of ringing alarm bells.
USDKRW and USDCAD are moving above long-term resistance. USDJPY will determine KRW and CNY. The high for USDMYR this year is a touch above the 1997 high. The current rebound is about a 50 percent retrace. Indonesia rupiah (not pictured) looks similar. Not a day ago, India was talking about letting rupee slide with yuan. Half a day later, rumored to be selling dollars to defend rupee.
“The market”, aka the common wisdom, is 180 degrees wrong on USD. “De-dollarization” is countries selling USD to prop up their currencies as they inflate faster than the USA or, in Europe, Korea and Japan, cannot match U.S. interest rate hikes because they’re skating close to recession. Meanwhile, everyone is piled into gold and Bitcoin thinking USD is doomed. USD exploded higher under Reagan and Volcker. We have a potential echo here with Trump and Powell. Rates in the U.S are still way higher than Japan and Europe despite recent cuts.
There are a lot of charts to consider, but many have a similar look to them. USD is reaching a point where continuation is going to trigger breakouts.
Forex doesn’t immediately feed back into stocks unless we’re talking about ETFs like $EWW, $EWZ, $EWY, $EFA, $EEM and so on that are impacted by currency fluctuations. When USDKRW made a new high in July 2022 it took about a month before stocks topped out. It’s a door opening. Timing will take coincidental triggers in bonds, commodities and stocks.
If USD reverses here, alarms shut off or at least pause. A pullback in USD would also make sense if there were pullbacks in all the election moves. If USD continues though, bear possibilities start expanding. I hesitate to scream bear at a bull party since the only thing I see in equities is NQ struggling at the July high (double-top anyone?) but if USD were to accelerate from here………and looking at gold clearly reversed off 40-year resistance trendline from 1980-2011 peak, and reversing off 1980-2011 CPI-adjusted horizontal resistance, and euphoria in Bitcoin, a part of me is starting to think…………
