The U.S. Dollar is still ‘it’.

Do you remember all those stories and prescribed theory surrounding all that American money printing and how it will devalue the Dollar.

The vernacular moved “if they keep manufacturing money and its going to be worthless” and when coupled with all of that government debt, the doom seemed excessive.

Keep in mind that the U.S. will never pay off its debt. Its debt is different to our personal debt.

So with that in mind,

In July 2020, I wrote this…

Here is an extract within that article,

“my strategy has been to Sell AUD / Buy USD at 0.68, 0.71 and then 0.75 (if it touches that level) will bode well for investors……………Structurally, I am a US Dollar Bull…….the United States just saved the world with its cross currency swaps and people think this will be its undoing……….The Dollar will remain the centrepiece of our financial architecture within our lifetime.”

Since July 2020, the U.S. Dollar has maintained its strength.

Here is a chart showing that against a basket of currencies.

And here is a chart of the Australian Dollar versus the USD.

The ellipse shows the small amount of time the AUD spent above 75 cents, while there seems to be an omnipresent lid on its value.

Today, my bias is for a lower AUD against the USD.

If it trades below 0.6828, then look for a test of the 0.6580 region.

Failing to hold that support area, then probability of 0.6200 commences to increase.

This general view (and the latest decline in the AUD) is commensurate with my view of lower commodity prices, in the interim.

For now, let’s say 2-8 months.

If this pans out, then the positioning will be summarised as Australia would be ‘on sale’, on a global currency basis. It will be beneficial for businesses which sell products (receive revenue) denominated in USD.

June 21, 2022

by Rob Zdravevski

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