Last September, the Congressional Research Service published an "In Focus" report. They had already attempted to address speculation about the dollar's dominance in the face of global economic and geopolitical changes at the time.
Three major threats were addressed in that document.
China and its currency have risen to sixth place, accounting for 1.66% of global payments.
The next source of concern was US financial sanctions, as the share of Russian exports to Brazil, China, India, and South Africa in US dollars fell from 85% in Q2 2018 to 36% in Q4 2021.
Digital currencies, which include cryptocurrencies and digital currencies issued by central banks, have completed the list.
“Some policymakers have expressed concerns about an international race to create a digital currency with widespread adoption, arguing that the United States should create a U.S. digital currency to maintain the dollar’s prominence in international payments.”
"To date, there is no evidence of a shift away from the US dollar as the dominant reserve currency," the study concluded.
At the time, I proposed two paths for the dollar: a continuation to the next target of $121 on an aggressively hawkish Fed, or a consolidation before resuming to the upside. The majority of readers supported both paths, with the consolidation option coming out on top.
The question of the dollar's dominance is resurfacing these days, as its value has plummeted dramatically. It is too early to tell whether this is a consolidation or a global reversal.
One thing is certain: the path of unending growth has been abandoned.
In my charts, I see a clash of perspectives. The technical chart is about to give a strong bearish signal. The chart comparing fundamental factors, on the other hand, supports the king currency's continued strength.
Let me show you each of them one by one, beginning with the emerging bearish alert. Continue reading "Is Dollar's Dominance Over?"