US debt and future of dollar – rally or decline? Market outlook and forecast
A lot of talks about coming crisis and possible dollar decline. Do you think I could stay away from these hot topics? – Nooo…
I agree with statement that coming years will be difficult for world economy and we are facing new crisis. Most of traders and analysts see overvalued stock market as pushing button for it. But I disagree.
First of all, crisis is only question of time. It’s normal cycle. I can even say that crisis is ‘pullback of world economy growth’. But in my opinion overvalued stock market is not the main problem, government debt is.
Most of you got an idea I am talking about USA and as result we should expect dollar decline. But no, let’s analyse. Yes, US economy has a lot of problems, including huge debt. Is that the reason for dollar to decline? – Again no.
Ask yourself what is dollar index? – it’s an average of exchange rate. And that is what really matters. US economy doesn’t have to be strong and doing great to keep dollar rally. It has to be a bit better than European and other main economies. The thing is Europe has a lot of problems – huge debt, Greece, Italy etc. GBP, JPY? See, nothing at the moment can reverse dollar. I am not talking about short term pullbacks. Remember it, when you will hear about dollar decline from some analysts. Dollar doesn’t need strong economy to keep rising, a bit better situation than in Europe will be enough. And that’s the only reason of dollar strength.
I expect we will see continuation of DXY rally and epic fall of precious metals, as I mentioned my latest trading forecast for gold. Yes, it’s not done yet. Looking at daily chart you can notice formation of bear flag, that confirms my forecast. I also had a look at COT and noticed smart money are still bearish.
Well, gold used to fall hard before almost each crisis and huge rally. The same story again and again. All is not so bad, I have good news as well – my trading signals subscribers and managed accounts holders will get good returns from these moves. 🙂
Good luck and good trading!