Dollar about to rally?

The other day a guy tweeted to me that I couldn’t have been more wrong about one call. Yes, I do get them wrong, as much as 50% of them. If not more.

I often write about that, as I also say that for your (financial) well being is probably much more important to be able to manage risk effectively than to be able to make a higher number of calls right. But I get where the guy was coming from. In the world of instant gratification people feel the need to be right all the time and demand instant results. Go figure, ha? Is this also be a reason why so many traders converge to short term trading? I guess.

Anyways, let’s get to today’s topic. I was a dollar bear not so long ago, but the recent developments were making me change my stance to more and more neutral lately when I was becoming also more open to bullish scenarios. It’s ok if traders live in their idealistic world where they constantly feed their own biases, but this might not so profitable. To me it’s not hard to change my mind and admit my initial analysis was negated.

We saw a breakout attempt in the dollar a few weeks ago and it initially seemed it will be rejected. We can see this from the $DXY dollar index chart below, see circled candles.

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Dollar breaking down

I bet you found yourself being a bit early on the market on a few occasions. This can be very risky, because there’s a thin line between being early and being wrong. Having a sound risk management one can prevent losing (too much) money, however one must remember that there are two dimensions of a good trade, time and direction. If either of them is wrong, you risk losing money! Thus I don’t trade on my macro views until the tape confirms them.

I wrote a post Euro to repeat 2017 move? three months ago. Clearly I was early, but now it looks US dollar is finally breaking down, thus confirming euro and other currencies could appreciate versus the dollar.

Let me start with a monthly chart of Trade Weighted US Dollar Index of major currencies by FRED. The broad index looks more bullish too be fair, but it does not offer that much history, so below I will show you an equally weighted index against emerging market currencies too.

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Euro to repeat 2017 move?

The US dollar is the most important currency and EURUSD is the most important currency pair in the world. When you get the dollar right then you can get most things right because everything is so interconnected and linked to it. This is also the reason why I focus so much on it.

I highly respect opinions of some friends and people I follow who think that the dollar might appreciate a lot in the coming months, but I don’t agree with them. I think that the world needs a weak dollar, stocks need it and the inflation narrative needs it too.

I’ve been saying that for some time, and you’re welcomed to read my last post about bonds and inflation as well as my last one on the dollar. 

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When even the bears get bullish

The dollar or its index DXY rallied by around 8% in the past few months after it lost 15% since the beginning of 2017. In post ‘Macro overview’ I wrote we might get this tradable counter trend rally and it feels to me it could be a good time to flip the card again. This time in the direction of the primary trend, which is becoming bearish for the dollar again. Read More

Macro overview

I would like to present you my current macro views. The markets are at very interesting points and offer very good opportunities at the moment.

The format of this post will be slightly different than usual, I will post my tweets because I think that the combination offers a better reading experience.

I would like to start with the major stock market indices. There is so much interest in this market thus everyone has an opinion on it. I’ve been seeing so many bearish calls lately, such an increase in the negative sentiment,.. Sure, they might be right and as stated many times before, I don’t mind if the markets doubles or goes to zero from here. All I care is to participate from the right side. Read More

The bullish pound sterling?

Sometimes it’s really hard to write a post about a topic I wrote so many times before. I’ve just recently posted an update on the USD view focusing on the EURUSD pair. Even though I am writing about the pound sterling today it goes hand in hand with the bearish US dollar thesis because the cable is arguably the most important GBP pair.

Two weeks ago I tweeted “Anyone else thinks this is likely? $GBPUSD” suggesting that I am expecting a resolution higher in price. Read More

What happens if you trap some bears ahead of the winter?

I guess they could go into a panic mode and it could get ugly! In this case I would not want to stand in their way, but I would rather use the opportunity, run behind them and press the bears even more.

As you know, I am a long-term US dollar bear, I wrote about my views many times before. Two months ago I wrote a post about an expected ST correction in the dollar (or in FX pairs against the dollar). We did get it, but in EURUSD not as deep as I have been expecting. Which is not bad if you ask me, just shows how strong EUR really is. Or if one wants to put it differently, it shows how hard it is for USD to catch a bid.  Read More

Can technicals get any better than this?

I am enjoying my time on holidays now and I wasn’t planning to post much in the next two weeks. But the trading idea I will present in this post very briefly is one of the things that just can’t go unnoticed.

Currency pair CADCHF is one of the products that respected technicals so beautifully it’s hard to describe it with words so please take a look at the next chart. Read More

Dollar to catch a bid?

Is the dollar about to turn just when everyone got excited with their shorts? We’ve seen an amazing selloff in the last couple of months, and while I still believe we are in the beginning of a major bear market [please see more here], I would not be surprised if we see a corrective rally from the current levels. This would also fit well into gold story discussed in the last post. Read More

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