Is the Dollar Calling Powell’s Bluff?

Hey There Income Hunters,

 

The Greenback is calling BS on J-Pow … 

 

 

Capital is flowing out of the US just when you would expect the opposite. That is a real warning sign. 

 

Let’s never forget the market is all about liquidity and when liquidity dries up it usually spells trouble for financial assets in a country that has huge debt problems. 

 

Today, I’ll run through why capital is in flight and trades to consider as the heat is turned up at the Fed …

 

Dollar is THE Most Important Signpost 

 

I have to admit I never thought we would see the dollar drop like this so quickly. 

 

Yesterday’ volume was the highest we have seen in over a year. The dollar index ETF (Ticker: DXY) confirmed the breakdown below the 50 DMA from Tuesday on 250% higher volume. 

 

We are now at the lowest levels since early November .. The timing of which comes at the peak of the Fed hawkishness. 

 

Reasons for a Capital Flight out of US:

 

      • Global rate differentials have shifted in favor of foreign countries like Brazil that has raised rates from 2% to 9.25% in 10 months. 

 

      • The other big factor is lost GDP from Covid outside the US 3x larger than GDP lost inside. This is another reason for capital to be leaving the US. 

 

      • You have to consider the fact that China could be selling some of its dollar reserves. I mean the PBOC has been aggressively injecting money into China’s economy and the Yuan has not budged from the dollar.  

 

The bottom line is since the Fed has built up massive debts the dollar has consistently weakened with each set of rate hikes. This has been going on ever since the Fed and banking system took control of the US financial market economy. 

 

Could the Dollar Drop Ignite a SPDR Gold Trust ETF (Ticker:GLD) Breakout?

 

Fed Hawkishness has been a headwind for gold but it hasn’t gone down, which on its own is a positive signal. Now it is knocking at the door to a significant breakout above 171.00.

 

If it breaks above 171 that means it has put in a higher low and a higher high in the shortest time frame. This will turn the short-term trend bullish.

 

Notice in the chart below that GLD has also broken above a confluence  of moving averages on higher than average volume. If we can repeat this above 171 GLD will build some nice momentum.  

 

 

Bring It Home

 

I also like the ETFMG silver miners ETF (Ticker: SILJ). The miners will explode once the metals breakout and historically they outperform the metals significantly once the rally is on.

 

Today come check out the Tradefest at Option Pit where I will join Mark, Andrew, Licia and Frank to give you our take on the next trades for 2022. 

 

I will be revealing a lot of information on what the Fed can and can’t do this year and how to anticipate what their next move will be so you can crush it 2022.

 

We are in for a wild ride so don’t miss Tradefest 2022 … Until then …

 

Live and Trade With Passion My Friends,

 

Griff

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