On Fri 14 Jul 2023 6.52pm, I broadcast / emailed Clients my latest post titled 'Demise of the King?'.
Below is the full transcript for your perusal:
'Dear Clients .
The biggest story of the past week was not CPI / PPI nor S&P500 new highs or Peter Lim's latest foray into Vietnam.
It is King USD (aka Dollar Index DXY) breaking below its 2023 low at 100.79 (see attached Chart).
USD index (aka USD va a basket of currency majors)
Daily Chart, 15-mth
Recall back in Dec 2022 (see ref below), I explained that there was a strong feedback loop where rising US interest rates beget USD strength and vice versa. This was indeed the 2022 death knell to all global risk assets ranging from Tech stocks and Bonds to Crypto & Precious Metals, you name it. (ref to my memo https://tinyurl.com/expectweakness) . Today as of mid July, inflation metrics (see last Wed US CPI & Thurs PPI nos) continued to ease while the USD Index (DXY) appears to have broken down a strong 2023 support line. Will both developments be the precursor for the FED's 'peak rates policy' going from here? . If that is the new narrative, be prepared for Emerging Markets Equities, Bond Market (Fixed Income) & the Precious Metals Complex to catch a stronger bid riding into 2024! In a nutshell, all three asset classes have a strong and inverse relationship with a weakening USD and easy interest rates policy. . Watch this space. Feel free to drop me a line to pick my brains on how you may take advantage from this narrative!
- Updated as of 31 Jul 2023, SG time 11.40pm -
After the initiation of this post, the USD Index (DXY) has attempted to 'back-test' to where it broke down from and more, thus making the analysis of this move more complicated.
However, current price action is still unable to break up past the 1-year downtrend line black line (see above price chart).
Of course, resumption of a strong USD Index is likely to exert some pressure or act as a broad over-hang for global risk assets. Will be watching closely. .
Live Long & Trade Well.
Thank you & regards Thomas Ng, CMT Principal Trading Representative 首席股票经纪 www.thom-ng.com
Image source: wix.com