US Dollar Pendulum Swings Back

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Forex Dollar Bulls - the pendulum leaning back to a strong  greenback.

The Ups and Downs of the Greenback Pendulum

The Greenback pendulum swings again.

Against all the other majors and commodity pairs, the US Dollar index surged at a meteoric pace, and in August 2022, it looked like there was no end in sight to the rise of the USD.

But then things turned around, and after a rough three months, from late 2022 until mid-January this year, the Greenback looked to be reversing much of the historically high levels achieved during 2022. 

What happened? What’s Changed?

In late 2022, inflation showed signs of easing due to the most aggressive interest rate rise seen in decades by a very determined and hawkish US Federal Reserve.

A helpful shove in this universal inflation battle was a sharp drop in oil and energy prices, boosted by easing the supply chain crisis, an improved computer chip, and other industrial hardware shortages.

The Russian war machine looked very tired, and it was a distinct possibility that Putin might be looking to pack up his armaments and head home. So Covid hardly got a mention, even though China still had its fair share of it.  

The stock and equity markets showed significant gains, and some heavily battered blue chip stocks began to bounce back. The light on the horizon shone a little brighter. Moreover, the Eurozone outlook improved as the battered currencies embarked on a solid comeback.

Now, the pendulum is swinging back as the USD surges ahead.

2023: The Greenback Pendulum is Swinging Back

First – let’s look to the Federal Reserve for some answers. Interest rate hikes are continuing to be in focus.

The initial US peak bank rate of 4.8% for 2023 is no longer on the cards, and the talk now is 5.5% moving closer to 6%. 

As mentioned earlier, interest rate hikes have always had a direct bearing on the value of a currency, and it’s always been evident regarding the USD. But unfortunately, inflation is rearing its ugly head again, and we are all feeling it at the gas pump.

The Pendulum Swings as Russia Regroups

Putin has re-grouped his Russian forces, and I do not believe he’s prepared to place the Ukraine war in the loss section. Instead, he will do whatever is necessary to win, even if tactical nukes are on the table. This a game changer.

I pray this does not happen. But the combination of the recent surge in the Greenback, the latest inflation reports, the stock market reversal, and a few other factors I mentioned earlier means one thing. All the hallmarks of movement to the relative haven of the USD are on the cards. 

So, smart money is moving in that direction. 

As always, we will be watching!

Our job in these times is to spot trading opportunities as they unfold, and keep you informed with precise Entry, Take Profit, and Stop Loss levels. 

These markets are fluid and dynamic. We will be watching, so you don’t need to! 

Did you miss this trade?

AUDUSD SELL TRADE at 0.6811, moved 93 pips on February 23, 2023