Stronger dollar ahead

fedescolari (58)in #money • 6 years ago (edited)

It is perhaps the time to Buy the USD

I thought I would never say it, but, even though long term I am truly convinced the USD will loose its appeal as World Reserve Currency and depreciate massively, given the massive money printing to date, we are now in a point in history which favours a stronger USD.

Source: Pixabay.com

Most market analysts see USD continuing its depreciation, and Bloomberg analysts’ consensus see EUR/USD to move to 1.26 by year end, from 1.2 today.

I think we are likely going in the opposite direction, please read below for rationale.

I am not usually usually looking too much at the technical picture (see chart below), but as you can see, it is pretty evident, the EURUSD have moved out of its recent 1.5 years up-trending channel. Its is broken officially.

Now where? Here is where you want hear about fundamentals of why we shall see a stronger USD going forward.

Chart from my Bloomberg terminal

The narrative of cyclicality is kicking in now, and that is overcoming the other two important subjects when looking at forex markets: structural and political factors.

Positive cyclical drivers become increasingly dominant for the USD.

The Federal Reserve is looking to match its “dot plot” (the expected raiseS in fed fund rates) and at the same time, most of the World is actually not able, yet, to tighten the monetary policy. On the structural dront, the negative drivers for the USD already look to embedded in the price, while the political developments seem to be deterioration faster outside the US rather than within.

So we’ll have a stronger dollar in the next few months, what are the implications? Well, if you are earning/saving in EUR, GBP or CHF, it may be now a good moment to think about re-positioning your investments and / or hedge.

This is just my opinion, so please do your own due diligence, or ask any question you might have, I’d be happy to try to respond you :)

Bests,

Please resteem & comment. Im looking forward to hear you views

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