Long term dollar turnaround ?

The last years have been shaped by an endless seeming bullish run on the USD.

Now it looks like that this time could come to a near end, probably.


We can't predict the future and if you trade the markets you really should not trade it only based on signals, cause confirmation of the signal with price action is key.


If we look to the dollar futures we can see, that there was also the so called "death cross" between the ending of the last and the beginning of the new year.

This "death cross" happens if the 50 MA crosses the 200 MA. In the following chart you can see how this happens in the daily chart at the dollar future. But don't panic cause that kind of signal usually plays out over years and is in my experience a more long term kind of signal.

(The last crossing of these two MA's was in june 2018 and started a long term bullish move in the USD, so you can see that a technical event like that, doesn't happen on the daily basis)


If we look to the fundmental part, I have to say that the US economy still looks in a good shape and monetary policy has still some dry powder to shoot in the pipes (rates about 1.50-1.75%) if a longer term slowdown in the economy would happen. Of course 2020 also is an election year. So we have to keep our eyes on the new or old president in september this fall and consider what could happen if a democrat like Warren or Sanders could win the elections and how the markets would react to it (I guess a sell-off would be started)


I guess the real reason for a weaker dollar would be that the more trade related and exotic currencies have seen some bottom in their own price performance. It looks like many currencies like the CAD, EUR and even AUD (apart from bush fire crisis) have seen a bottom and the economic numbers looks more and more the same.


Summarized this of course is a long term perspective on the currencies and cause I'm mainly in the H1 timeframe I don't even care that much about long term trends of currencies.


But if we look in the daily picture, which many traders and institutions do, we have to consider a long term bearish move in all the dollar cross pairs more over we could also see some more confirmation for this idea in some further published economic numbers from the USD cross-pair countries.


By Lukas Kuemmerle

© 2021 by Lukas Kuemmerle

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