New leg beginning in USD bear market

[Bumble]

For myself, I'm no more convinced of a fall in USD than I was last year. The USD is the least dirty shirt in the laundry. Apart from a few small but solid currencies such as CHF or SGD, what can the USD fall against? The EUR? Europe is a basket case. JPY? Japan is the world leader in government indebtedness and money printing. CNY? China will continue to devalue to offset the effect of trade wars. GBP? It might rise against USD if if if Brexit resolves itself satisfactorily. AUD and CAD? Overvalued and likely to fall if there is a worldwide recession, though arguably not bad in the long run. RUB? Might do well, but who knows what those Russian jokers will do next.

If there is any kind of financial crisis, money will move into the USD, not out of it. It doesn't matter that it is a big heap of nothingness: it is liquid and that is what matters most in a crisis. The only respect in which the USD can fall is in its purchasing power, which is another way of saying high price inflation might return. Even that is not certain, given that we might get more deflation if China cannot sort out its debt problems. PMs are good to hold in any event, but I don't see a good reason to short the dollar.

[Kookaburracollector]

On 17/01/2018 at 14:44, breaktwister said:

From a purely economic perspective though, who in their right mind would buy or hold US Treasuries?  They are touted as a safe asset as the US has never defaulted but there will be a time when that debt mountain becomes unsustainable and the US will simply say "sorry, not gonna pay".   So China saying that they will no longer buy US debt is simply a rational economic decision.

The US has defaulted on several occasions in the past. The last being in 1934 when FDR refused to repay (in gold) Liberty bonds. They have done it before and will do it again. A very troublesome time we are approaching ...

[Stu]

Or they may simply print even more and steal further from those that hold.

 

[shortstack68]

5 hours ago, Bumble said:

For myself, I'm no more convinced of a fall in USD than I was last year. The USD is the least dirty shirt in the laundry. Apart from a few small but solid currencies such as CHF or SGD, what can the USD fall against? The EUR? Europe is a basket case. JPY? Japan is the world leader in government indebtedness and money printing. CNY? China will continue to devalue to offset the effect of trade wars. GBP? It might rise against USD if if if Brexit resolves itself satisfactorily. AUD and CAD? Overvalued and likely to fall if there is a worldwide recession, though arguably not bad in the long run. RUB? Might do well, but who knows what those Russian jokers will do next.

If there is any kind of financial crisis, money will move into the USD, not out of it. It doesn't matter that it is a big heap of nothingness: it is liquid and that is what matters most in a crisis. The only respect in which the USD can fall is in its purchasing power, which is another way of saying high price inflation might return. Even that is not certain, given that we might get more deflation if China cannot sort out its debt problems. PMs are good to hold in any event, but I don't see a good reason to short the dollar.

😂

[shortstack68]

On 15/01/2018 at 21:13, KDave said:

China is troubling the dollar from all angles it seems, playing the long game as usual. The US has a massive expensive military which gives it power, but without an economic base to stand on it is not sustainable. China are hitting where the enemy is weakest. Its getting quite overt now, plenty of news and fake news alike about China selling more US treasuries than it buys, quite publicly announcing oil trades in Yuan - look what happened to Saddam and Gaddafi when they tried to do that. I hope China does not push its luck too much, regardless of who is in the whitehouse. I would say challenging the US like this with someone as unpredictable as Trump in the chair is probably a bad idea. 

The exact reason why Iraq was invaded and Gadaffi was shot........OIL, Gadaffi wanted to move away from selling oil in USD, look at what's happening in Syria, USA wanted a pipeline from Saudi to feed Europe with oil instead of buying from Russia, needless to say Assad was having none of that, so America created some more bullshit to get their way, Iraq and Libya were like swotting flies, but China and their Russian allies won't be an easy prey for the Americans now that oil is being paid for in Yuan, the petro dollar is what props up the American military, they are paid to keep oil producing countries safe, Iran will soon sell their oil in any other currency other than the dollar and it will have an eventual knock on effect

[vand]

^^

All of which suggests that sentiment in the USD is firm enough that we are ready to begin a new downleg.

[KDave]

USD has been the safe haven as bumble says, last year the index was one of the best performing even against stocks, gold, commodities, it might have been the best performing asset I will have a look, it certainly did well in currency terms. That perhaps adds to the case that we are ready for a downleg but that primarily depends on continued requirement for, and perception of, what is the safe haven, and also as to the relative performance against everything else over the year. If gold does well people may switch from USD and add downward pressure, if expecting a repeat of 2018 then they will be buying and holding USD. There is a poster on here talking about doing that.

I am unsure as to how the perception of the economy measured in stocks will affect the USD, as stocks are the measure politicians (Trump) use - if we see a bear take hold in stocks, will the USD not do well out of that?

 

[vand]

The narrative is changing quickly.

The odds are now greater that the next move in Interest Rates will be DOWN... not up. we are done with quantitative tightening.. if you can even call it that.  An economy so indebted was so obviously never going to tolerate neutral interest rates. Despite what the Fed says, Gold is already telling us to expect new quantitative easing and inflation in future years. That does not fit in with a strong USD.

[KDave]

Good points yes the response by central banks will likely be a repeat of what worked last time - lower rates and pile into more QE.

Historically there are many examples of how to deal with debt that appear to all result in the same it just depends on who is given the burden, 

Devaluation of the currency via inflation takes from holders and earners. Debt restructure as in Mexico 1989 it is the bond holders that take a hair cut? Effectively a partial bankruptcy or you could look at it as a partial debt jubilee, same thing, the bond holders lose. QE is the same as both. Combined with lower interest rates, it is a devaluation that is not felt as inflation, and bond holders are not affected - but nothing is fixed. It is the ultimate can kicking exercise. The debt is still there as a problem, but it is manageable at lower rates (still costs more than the defence budget in the UK right now) and can continue to grow for some time until it isn't - but nothing has been fixed. I wonder will QE work again and if so for how long. How much more debt can we sustain, someone will have to lose big time eventually. 

[vand]

Chart is rolling over nicely..

[sixgun]

i hear that Saudi and China signed deals to trade oil in yuan........not in the mainstream at the moment.................tick tock tick tock.

Dedollarisation continues. We are into the last 2 cents of value of the dollar..........tick tock tick tock.

[vand]

Dollar 2yr rally looks done here. DXY topped at 103, now about to form a bearish death cross as those shorter term moving averages being crossing over:

[vand]

She cannae handle this, capt'n! 

[vand]

BIG test is coming up:

[vand]

Dollar is breaking down.

Let's be clear, this is the most important market development going on in the world right now:

 

[QStack]

@vand Stupid question but what does this mean? What are the consequences of the break down?

[vand]

It basically means deteriorating faith in the currency, and by extension in assets backed by the currency (US stocks & treasuries). 

[QStack]

Ah ok, thanks.

[vand]

DXY 2nd visit to 92.5 area in the last 4 sessions. Not looking good for the global reserve currency.

[vand]

Long suffering Emerging Markets are likely to benefit greatly from a weaker dollar over the coming years: 

https://www.knowledgeleaderscapital.com/2019/05/02/emerging-market-stocks-underperform-when-the-us-dollar-strengthens-heres-why/#:~:text=The relationship between the performance,the level of the dollar. 

[Paul]

To PrintFinity AND BEYOND !!!