US Dollar Pressures

 

 

Trader Scott’s Market Blog

October 11, 2016

 

 

There are a lot of folks out there who believe there is tremendous pressure on the US$. Agreed. However, most of those folks believe the pressure is to the downside. I believe the opposite. There are plenty of logical reasons to assume that the US$ is heading much lower. Agreed. But it’s all about the timing of it. I do not see a situation where the trillions outstanding in US$ based debt can have any effect but to push the US$ higher, possibly much higher. And combined with the disaster sitting in the European and Japanese (the US isn’t much better, but that will likely be the last to go) banking systems, thanks to many factors, including the insanity of negative interest rates. And what in the world is going to happen to the massive hedge funds, oops excuse me, central banks, when all of the negative yields which they are loading up on go to positive yields. And then keep going to even positiv(er) and positiv(er) rates over the years (meaning lower and lower prices). Who’s going to bail them out? And much of the debt which they are loading up on is low credit quality to boot.

But back to the US$. I do believe much of the recent rise in government yields (falling prices) is due to central banks (i. e. hedge funds) selling US Treasuries to support their own currencies. They know there is upside pressure on the US$, they can see it. And yes, the Fed will continue to attempt to fight it. But I’m not real great with fundamentals. I prefer to rely on my judgement of LIQUIDITY FLOWS/supply and demand via charts. So attached are annotated charts with my view of where we are in the US$.

Chart#1 Chart# 2 Chart #3

 

 

 

 

About

img_0074bwcrsmTrader Scott has been involved with markets for over twenty years. Initially he was an individual floor trader and member of the Midwest Stock Exchange, which then led to a much better opportunity at the Chicago Board Options Exchange. By his early 30’s, he had become very successful in markets, but a health situation caused him to back away from the grind of being a full time floor trader. During this time away from markets, Scott was completely focused on educating himself about true overall health and natural healing which remains a passion to this day.Scott returned to markets over fifteen years ago where he continues as an independent trader.



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'Trader Scott’s Market Blog – US Dollar Pressures – October 11, 2016' have 7 comments

  1. October 11, 2016 @ 4:59 pm Aamer zahid

    Hi Scott,

    Agree on the USD viewpoint but think that Fed and other CB’s will fight the trend with everything they have ! Strong USD is deflationary and also China would likely devalue again….

    But at what point will a strong USD and bullish move in the PM’s occur ? What will cause this shift in correlation ?

    Agree that a strong USD will cause lower oil prices. Is there a negative impact on equity mkts via lower earnings from exports etc

    Thank you as usual,

    Aamer

    Reply

    • October 12, 2016 @ 10:08 am traderscott

      Yes Aamer – the upcoming banking crises will be bullish for both markets. And, in the end, I do not believe in CBs, I do believe in supply/demand, but agreed it is all about timing. Believing in something is not a reason to buy/sell. I don’t care much about earnings, what drives markets is liquidity/supply and demand. A rising $ from capital flows would also go into stocks.

      Reply

      • October 12, 2016 @ 4:46 pm Aamer

        Thank you. Makes sense.

        Does the election timing have any impact on the above discussion and also re outcome of election ?

        Being a cynic I think everyone will be disappointed…..but love to get your thoughts.

        Thanks as usual,

        Best,

        Aamer

        Reply

        • October 12, 2016 @ 5:30 pm traderscott

          Well Aamer, as a fellow cynic, it’s interesting that the election falls into the “timing band” of where I was expecting a big pick up in volatility anyways, and a retest of last December’s low in gold. But, the election itself, didn’t actually directly affect my thought process. And yes, the election outcome will certainly affect markets. The key is to watch how they trade going into the election. Are strong hands accumulating or distributing, that will “tell” a lot. We should all be very concerned about the rapid loss of confidence by the masses in the old order of things occurring right now. And yes 100’s of millions around the globe will be extremely disappointed by whatever the outcome.

          Reply

          • October 13, 2016 @ 5:09 pm Aamer

            Thank you. Really appreciate your insights and time.

            Kind regards,

            Aamer

  2. October 13, 2016 @ 10:26 am David Parker

    You mention liquidity flows which I have heard others talk about as well to determine the direction of the market. Today, the general markets is looking very weak but the gold shares and gold are holding up pretty well. Is liquidity finally moving from the stocks to miners and gold, like what happened after 2000 when gold/silver stocks blasted higher and the highly speculative technology stocks tanked?

    Reply

    • October 13, 2016 @ 10:42 am traderscott

      Liquidity flow is very nuanced and tricky. But it basically refers to QUALITY demand and QUALITY supply. That’s what we have to judge. And no today itself is not part of that. And I do expect lower lows for PMs, but I do expect those lower lows will see a tremendous amount of quality demand to resurface. Some already appeared last week. But short term, general stock markets are at support levels, so it’s not a great place to turn bearish (short term).

      Reply


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