Gold 1837,14
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EURUSD 1,2128
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DJIA 31383
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OIL.WTI 58,375
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DAX 13914
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Below is a daily chart of the Dollar Index (DXY). Looking at it you can see that the US dollar has declined for the fourth consecutive day against a basket of the world’s major currencies. What is going on? Let’s get to the bottom of it.
DXY
A few days ago, in a newsletter about the fall in gold, we noted the following. Gold broke through the lower triangle line precisely because of the sharp rise in the US dollar against most other assets. On the same day, the Euro/Dollar pair fell below the crucial support at 1.20. In that newsletter, we recommended waiting first for confirmation that a long-term upward trend for the US currency had begun.
The next day everything changed 100%. The dollar began its 4-day decline. Stops on the euro/dollar pair below 1.20, on the dollar/japanese yen above 105 and on the dollar/frank above 0.90 were removed.
And it reminded us of something. We have seen similar patterns involving the removal of stops behind round levels throughout most of 2020. This year is expected by experts and analysts to be extremely volatile. The levels of 1.10 and 1.30 for the Euro/Dollar pair are being called, which may not only be reached but also heavily crossed.
What if the situation turns out to be exactly the opposite? This year, in spite of all the experts, will not be a trend year. In this case, time after time, stops will be knocked out behind important levels, then the price will return to the corridor. And the pattern will repeat on the other side of the corridor.
There are considerable prerequisites for this. On the one hand the US dollar should fall as the Fed continues to print new money in huge quantities. On the other hand, as we have already pointed out, the coronavirus situation in the USA will be brought under control very quickly. This will (already is) leading to a rise in trader’s interest rates. A dynamic equilibrium situation is emerging, which prevents the US currency from making a 5-10 figure leap in one direction.
09.00 Address by ECB Vice-President De Gindos
14.30 US jobless claims reapply for the week
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