US Dollar Headed Significantly Lower with Lower Highs Lower Lows
The bobbleheads on Wall Street will tell we that a US dollar is going higher. But they’re wrong. Big-time. – Sean Brodrick
And we can cruise fixation your bets now for when a long-dollar trade blows adult in their faces.
So because do they cruise a US dollar is headed higher? Rate hikes.
The U.S. Federal Reserve is signaling during slightest dual 25-basis-point rate hikes before a finish of this year. Heck, maybe more. Boston Fed President Eric Rosengren pronounced a executive bank should lift rates 3 some-more times this year.
Higher rates meant that Treasuries compensate some-more interest. So we can get some-more seductiveness on holds denominated in US dollars than in, say, euros.
That’s a theory. But other army can lift currencies around, too.
Let me indicate out 3 horsemen temperament down on a greenback right now …
Reason #1: Trump’s Tax Reform May Not Fly. The dollar is rising on certainty that taxation cuts due by President Trump will cruise by Congress. Those cuts, in turn, will kindle business and boost a economy. Economic expansion boosts a dollar.
Not so fast! The conservatives in Congress will frustrate during lifting a deficit. More on that in a minute. So that means we need spending cuts to compare a taxation cuts.
There isn’t that most to cut. There’s a Defense budget, and Trump due lifting invulnerability spending. That leaves Social Security and Medicare.
So basically, a approach to get taxation cuts is to cut checks to Grandma. And Grandma votes. Grandmas opinion in jagged numbers. Any Congressman who votes to cut Social Security competence as good place a metaphorical gun in his mouth and lift a trigger.
Unless Trump has some spectacle in his behind pocket, taxation cuts could be in trouble. That’s bad news for a US dollar.
And vocalization of a bill …
Reason #2: Watch Trump Bang His Head on a Debt Ceiling. Even if Trump changes nothing, he’s still going to strike adult opposite a debt ceiling. It’s set to finish on Apr 28.
Do we remember when there was a conflict over a debt roof in 2011? The supervision close down briefly. It triggered a initial U.S. debt hillside in history. It also helped send bullion to $1,900 an ounce.
We also narrowly avoided a supervision shutdown in 2013. Here’s where it gets interesting.
The hot-heads against to lifting a bill roof in 2013 were in a organisation called a “Shutdown Caucus.” One of a members of that congress … was a man named Mick Mulvaney.
Fast-forward. Now, Mulvaney is a Director of a Office of Management and Budget. In other words, he’s a conduct of a group that prepares a sovereign budget.
I cruise Mulvaney competence finish adult like a dog that finally catches a car. What a heck is he going to do? Propose large cuts to Social Security and Medicare? Good fitness with that, Charlie.
If a supervision shuts down … and if a supervision balks, even briefly, during profitable a debts … afterwards this throws a full faith and credit of a U.S. supervision in doubt. As a debtor republic that depends on other countries shopping a bonds, this is sophistry dynamite.
Such a pierce would also kneecap a US dollar.
Now let me uncover we one some-more thing that tells me a US dollar is in trouble.
Reason #3: Dollar Downtrend. Here’s a draft of a greenback …
Lower highs and reduce lows meant one thing — a downtrend. That’s what a US dollar is in now.
I’m not observant a US dollar is doomed. YOU can make that argument, though we don’t trust a universe will get absolved of a haven banking overnight. I’ve noted clever support for a US dollar on a chart. Maybe it will revisit that level. Maybe it will rebound for other reasons.
This downtrend is function notwithstanding expected rate hikes. So maybe ask yourself, what if a Fed doesn’t travel rates? What will a US dollar do then?
Sure, we’ve had some good news on consumer certainty and manufacturing. But that’s a topping on a flattering unsatisfactory mercantile cake.
For example, FactSet tells us that over past 3 months, first-quarter gain forsaken by 3.6% while a SP 500 itself indeed went adult 5.8%.
To me, that sounds like a undo from oppressive reality. One that could run uncontrolled into a Woodchipper of Disappointment for all sorts of reasons.
Bottom line: The US dollar is trending reduce — even as bullion is trending higher. What I’m going to do is use counter-trend zig-zags to supplement new positions. To float that trend to potentially huge profits. You should cruise doing a same.
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