2022/10/16 (089) Technical Analysis

The USD Stabiluzes At The Excepted High Levels!
Was It That With The USD Rally? Is The Focus Now On The GBP?
I Don`t Know – But I Know That No One Has Ever Died From Taking Profits…

In financial circles at the moment there is hardly such a defining topic as the strong US dollar. The US currency is trading at its highest level against the euro since 2002, and even at a record high against the pound sterling. And we’ve been at it since one of my first DEVISE 2 DAY Affiliate Financial Market Online Newspaper Edition with a long 4XSetUp trading capability in the DXY.

Many US critics argue that the greenback is endangering the stability of the international capital markets. Which I would like to emphatically contradict. Because the FED is absolutely doing the right thing for the US economy – and is not the BIS. So the mother of all central banks. But of course you also take into account the monetary policy of the other central banks, which will also have to react to the fiscal policy of your currency area due to the rampant inflation. So I’m in the camp that argues that the US dollar is only so strong because other currencies are so weak – ie your current fiscal policy, let alone current economic policy. “The US dollar is the ‘wrecking ball’ of the global economy, shaking international capital markets and making non-US investments, particularly in emerging markets, unattractive,” one tweeted recently. In this or a similar form, such an argument has recently been frequently expressed by various politicians and economists. However, at least in my opinion, the political decision-makers are hiding behind such a statement. In order to denounce your voters and/or the politics that they propagate as economists as the strength of the US dollar. Because the FED is doing everything right during historically high US inflation, historically negative US trade balances, and/or historically low US unemployment rates. And that’s just a higher interest rate above US inflation – even if it costs GDP growth. But the US unemployment rate doesn’t necessarily have to bounce back. But maybe it just reduces the profits on the US stock market because there is a more expensive US yield curve in Chicago with a secure interest rate, with less risk! But that’s a dream of the future – were we off?

The USD Index At A 20-Year High

The relative strength of the US dollar is usually attributed to four factors by most other observers. And which, depending on the interpretation, from case to case, are weighted differently by other financial market participants, whose word I take just as seriously as you do mine: The historically above-average offensive interest rate hike policy of the US Federal Reserve (Fed) for the purpose of combating inflation we all address. However, the media that write about the price action of the US dollar, the shares in New York and/or the US yield curve in Chicago weight the effects on the comparatively strong US economy with historically low unemployment figures differently. While most fear even sharper and higher interest rate hikes – mostly because they don’t want to see a weaker US stock market as a result – many argue with high US unemployment and recession. Even if it may read politically left-wing for many, the argumentation of a French left-winger, but due to a hesitant monetary policy, as a FED boss I would not let the middle class, let alone the working class, pay. Like Sleepy Joe with his progressive and libertarian, with his green politics, under the cloak of democracy. With which he shot himself and the US economy in the leg, and now instead of producing oil himself, wants to go abroad to buy it – but (as the Saudis publicly say) doesn’t get it. Which increases the USA’s dependence on foreign oil-exporting countries, which, politically, usually do not perceive the USA as a friendly trading partner. Which traditionally continues to increase demand for the world’s leading currency, since everyone who comes and wants to buy oil from us knows. So that all these intertwined and briefly outlined factors, which I could write a whole book about, have just caused the dollar index to rise sharply of late. And this index has risen by around 20 percent in the current year and is at its highest level for almost 20 years.

Aggressive Fed Rate Hikes Strengthen The US Dollar

In fact, interest rates in the US are significantly higher than in Japan or the eurozone, so it is not surprising that the Japanese yen and euro fell against the US dollar. A high level of interest rates attracts investors to the currency area, while lower interest rates tend to make a currency less attractive. While the US already has a key interest rate of 3 to 3.25 percent, it is 1.25 percent in the euro zone, 2.25 percent in the United Kingdom and still zero percent in Japan. All three currencies therefore lost attractiveness against the US dollar. But who am I writing this to? My attentive readers have known that for weeks, for months?!

Further Rate Hikes In The US Very Likely

After initial hesitation, the Fed, led by Jerome Powell, has been working flat out since March to combat the highest inflation rates in forty years. So far, the plan to reduce the demand for goods and labor by means of higher interest rates and thus bring it back into balance with the existing supply has had mixed success. The US job market report for September published on Friday even showed that the unemployment rate fell from 3.7 to 3.5 percent despite higher interest rates. The Fed is therefore likely to stick to its restrictive interest rate policy in the first few months of next year, even if this should also trigger a recession.Very Important Price Action Areas
For The Next Days, Weeks And/Or Months

121.020 07/02/2001 yearly high 2001

120 4XSetUp @ Target

115.110 09/14/2001 intraday high of 1st day after 9/11

114.778 09/28/2022 new yearly and/or sep`22 high

113.298 10/16/2022 last price @ friday closed

112.200 09/14/2001 intraday low of 1st day after 9/11

110.055 10/04/2001

110 4XSetUp @ Stop Price

109.478 08/29/2022 new yearly and/or aug`22 high

109.294 07/14/2022 new yearly and/or jul`22 high

108.873 08/26/2022 significant low under 110 points

108.090 02/01/2001 yearly low 2001

107.680 09/13/2022 significant low under 110 points

105.788 06/15/2022 new yearly and/or jun`22 high

105.005 05/13/2022 new yearly and/or may`22 high
105.005 05/13/2022 c) parallel line of upside-trend

104.636 08/10/2022 b) lower line of upside-trend

103.928 04/28/2022 new yearly and/or apr`22 high

97.685 03/30/2022 a) lower line of upside-trend

96 02/14/2022 Entry Price @ 4XSetUp
Fed Vice President Brainard: “It is essential to avoid premature exit”.
Last week, Fed Vice President Lael Brainard also announced that the Fed will pursue a hawkish interest rate policy for the foreseeable future. “Monetary policy will have to be restrictive for some time so that we can trust that inflation will move back towards the desired target. For this reason, we absolutely want to avoid moving away from it prematurely,” the “Neue Zürcher Zeitung” quoted the US as saying -monetary politician. The prospect of further interest rate hikes, in turn, supports the US dollar. Even if many investors are of the opinion that Powell & Co. are tightening interest rates too aggressively, the most recent interest rate hikes (three percent interest rate increase in six months) are put into perspective by historical comparison. In 1980/81, for example, the Fed, under the leadership of ex-President Paul Volcker, increased interest rates by a whopping eight percent within six months.

Dollar Enjoys Wave Of Momentum

The dollar index regained ground above the 113 mark, bouncing back from its weekly lows of around 112 touched in the prior session, as investors refocused on the course of monetary policy. Triggering another leg of gains was a report from the University of Michigan showing that US year-ahead inflation expectations increased for the first time in seven months. Such a reading came on the heels of hot inflation data earlier this week, pushing back on the idea of a pivot any time soon while adding to expectations for another jumbo interest rate hike in November. The most pronounced buying activity was against risk-sensitive currencies such as the Australian and New Zealand dollars. The dollar also enjoyed sharp gains against the British pound as recent actions by Prime Minister Truss were not enough to boost investors’ confidence. For the week, the DXY is up roughly 0.5%.