Update: Monthly U.S. Dollar Overbought

This chart updates the percentage which the DXY Index is trading above its 200 Month moving average.

Rare air indeed !

This may be the 7th inning, 8th or 9th….but it’s not the top of the 1st.

Incidentally, We are days away from closing the quarter and U.S. corporate earnings will be reported soon after. A reminder to look for management commentary in their earnings call about the effect the strong U.S. Dollar is having on their results.

The strong dollar is something the United States needs to be wary of because prolonged strength is adding to the probability of sustained inflation.

Commercial and military aircraft are costing the rest of the world let alone other U.S. goods and services.

More importantly, the majority of the major commodities are priced and traded in U.S. Dollars.

Rather than the Bank of Japan intervene and spend $21 billion (which is slightly more than the $15bn in U.S. aid sent to Ukraine) to buy and support their Yen…..

and rather than wait for the U.K. government or the Bank of England to crank up rescue packages to support the British Pound…

perhaps the U.S. Treasury (Janet Yellen) should start making announcements designed to weaken their currency?

Such action may possibly help your ‘friends’ in the G-10; help your own bond market (your cost of capital) and make the world a better place.

Keep in mind that a U.S. 10 year bond yielding 3.85% in isolation isn’t a concern until you ponder that the bonds of other nations are seemingly trading a ‘better creditworthiness’ of 3%.

But then again, the market may end up fixing it all for you.

September 27, 2022

by Rob Zdravevski


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