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Misleading USD Signs

by Ashraf Laidi
Mar 3, 2022 18:23

Germany's exposure to the war in the Ukraine and the resulting plunge in the euro is triggering a familiar bifurcation in the US dollar index. 58% of the DXY is held in the euro, which overlooks 3 ½ month highs in AUDUSD and NZDUSD. It is nothing new to see a breakout in dollar index (above 97.50) alongside persistent bullishness in gold and silver. The charts below highlight the latest divergence between DXY and USD's showing vs the antipodean currencies. Meanwhile, equity indices are charting a gradual bottoming, consistent with Bitcoin and Ethereum. 
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Misleading USD Signs - Dxy Vs Indices Vs Components Mar 3 2022 (Chart 1)

The case for metals and rest of commodities remains the following: Fed tightening will cap inflation at its 5-6% high, and any pullback will settle at a higher low of 3-4%. Once the Fed is forced to “fiddle” with the yield curve (prevent it from inverting), the short-end will peak out, letting 2-year-breakevens extend higher, to the benefit of metals.  The above prospect is considered as a durable positive for metals, overriding any double-blow from a nuclear deal with Iran and cease-fire in Ukraine as is shown here.

Putting strategies to work

Here is the rationale (below) behind opting for CADJPY yesterday ahead of the BoC rate decision for our WhatsApp Brodcast Group

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Misleading USD Signs - Whatsapp Cadjpy (Chart 2)

Meanwhile, equity indices are charting a gradual bottoming, consistent with Bitcoin and Ethereum. 

The case for metals and rest of commodities remains the following: Fed tightening will cap inflation at its 5-6% high, and any pullback will settle at a higher low of 3-4%. Once the Fed is forced to “fiddle” with the yield curve (prevent it from inverting), the short-end will peak out, letting 2-year-breakevens extend higher, to the benefit of metals. The above prospect is considered as a durable positive for metals, overriding any double-blow from a nuclear deal with Iran and cease-fire in Ukraine as is shown here. CLARIFICATION about our WhatsApp Broadcast Group

I need to clarify that our WBG is a Broadcast Group, which is UNLIKE regular Whatsapp Groups. This means, members of our WBG can neither see other members, nor communicate with them. All communications are between the Broadcaster (me) and members. Anonymity is intact ! Here is how to be a member.

 

 
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