Trumponomics, Bonds And The Dollar

Lior Alkalay - Contributor - Forex

President-elect Donald Trump’s inauguration won’t take place for two more months and yet his proposed economic plan is already sending ripples through markets. Treasury notes and bonds are tanking, stocks are rallying and the Dollar Index has surged to highs not seen in more than 10 years. All of which is in utter contrast to what analysts had expected to occur post-Trump’s election, and which seemingly presents a paradox of sorts. Trump’s two economic focal points are aggressive tax cuts and massive infrastructure investment. Both are expected, according to The Office of Management and Budget, to push the US debt burden by roughly 25% of GDP by 2020. And yet, in conjunction with those expectations, the Dollar is gaining.

Naturally, the most obvious reason would be that higher deficits will lead to inflation and, consequently, would force the Federal Reserve to raise interest rates. But that is a consequence rather than a reason. The real reason is that both the US economy and the US banking system have been ripe for higher rates for a while, and Trump’s plans for the economy, or “Trumponomics” as we like to call it, is merely a catalyst for an already strong economy. Continue reading "Trumponomics, Bonds And The Dollar"

Impact Of Fed Rate Hike: June vs. September

Lior Alkalay - Contributor - Forex

The Fed dropped a bomb this past Wednesday when it released the latest FOMC minutes—a rate hike in June is possible. Weak US growth in the first quarter of the year and a slowdown now, coupled with nonfarm growth below 200K jobs might have suggested a more tamed statement. Markets responded to the surprise with a selloff in Treasuries and equities and a surge in the Dollar. And yet, despite the explicit mention of June, a rate hike in September seems more likely.

Just like the December 2015 rate hike, the Fed softens the blow by throwing out the possibility of a rate hike before the conditions are actually ripe for one. By the time the Fed actually lifts rates, the money market and the bond markets have adjusted and the shock is minimal. Continue reading "Impact Of Fed Rate Hike: June vs. September"

The Dollar Index: Make Or Break?

Aibek Burabayev - Contributor - Metals

In this post, I would like to offer a global outlook for the gauge of the most financial assets, for the US dollar via its index DXY.

It is important to understand the global trend for the dollar to plan our precious metals strategy. I've included four charts below with different periods of observations and you can judge for yourself what you are after.

Chart 1. Dollar Index Monthly (1985-2016): Looks Bad!

Dollar Index Monthly
Chart courtesy of

On the monthly chart above, we see that the dollar dropped from the 125+ levels, then made a correction to the blue A point at the 121 level. After that, from 2001, we saw another massive sell-off of 51 points down to the 70 level in he notorious 2008. Continue reading "The Dollar Index: Make Or Break?"

China's Policy About To Hit The Dollar?

Lior Alkalay - Contributor - Forex

China has resorted to its old habit of stimulating the economy by allowing the Yuan weaken. But while the "remedy" has yet to work its wonders. The side effects, are already emerging—inflation is on the rise.

The People's Bank of China, China's central bank, ought to decide - support China's manufacturing or curb inflation.

What will the Chinese central bank do? And equally important, how will the dollar respond?

China's Central Bank: The Logic

In order for us to try and gauge the next move by China's central bank, we must delve first into the logic. In other words, what is the central bank considering? Now, that's not an easy undertaking, by any stretch of the imagination. Nevertheless, the task has turned a tiny bit simpler. Last month, in an interview with the Caixin Weekly, the Governor of the People's Bank of China, Zhou Xiaochuan, outlined the central bank's policy.

Here are the points to focus on: Continue reading "China's Policy About To Hit The Dollar?"

Dollar Takes A Plunge; Where Will It Land?

Lior Alkalay - Contributor - Forex

Undoubtedly, this February will be remembered as painful for the dollar. Investors have long awaited the opportunity to short the greenback after a prolonged period of steep gains. When US growth came out surprisingly weak, FX traders pounced, taking the dollar on a brutal roller coaster ride.

Then we had Janet Yellen’s testimony, which suggested banks should be prepared for negative interest rates. Many considered that a hit below the belt as investors were betting on more rate hikes. So now, they’ve got to get ready for negative interest rates? No one was prepared for that remark, despite Yellen’s suggestion that it was only a remote possibility. Of course, now, the million dollar question is, how low can the dollar go?

Short Term Dollar Outlook

As with all corrections, the first catalyst is always about momentum. The question of whether that will lead to a wider correction is fundamental. But what about the imminent target? That’s driven by technical momentum. So what do the technicals say?

Daily Chart of the U.S. Dollar Index
Chart courtesy of

As seen in the Dollar index chart above there are two key levels in this correction. The first is our resistance level at 100. The Dollar index has been attempting to break this level for a while now, though without success. When the Dollar index failed, it was really only a matter of time before the correction would come. And so as it did. Continue reading "Dollar Takes A Plunge; Where Will It Land?"