Dollar Strength or dollar weakness for 2020 and Beyond
Based on logical reasoning, the value of the dollar should decline due to the significant amount of money being pumped into the economy by the Federal Reserve. However, it’s important to consider that other nations have also implemented similar monetary policies, which can influence the global currency landscape. Another argument often presented is the high level of US debt. However, it’s worth noting that this argument could have been made many years ago when the deficit was significantly lower, demonstrating that the issue of high debt has persisted over time.
Source: www.usgovernmentspending.com
In 1901, the total debt amounted to 4.1 billion dollars, which, when compared to today’s levels, seems relatively small. However, it’s crucial to consider the perspective of the current era. Presently, it appears that the majority of the population is unaware or indifferent to the increasing debt levels. It seems that people are not likely to pay attention until the debt reaches an astonishing 100 trillion dollars. This highlights the importance of perspective and the potential disconnect between the general public’s awareness and the magnitude of the debt.
The US dollar is currently trading within a wide channel formation. Interestingly, when former Federal Reserve Chairman Alan Greenspan increased the money supply, instead of the dollar losing value, it actually surged. This challenges the argument for a hard money system. It would be highly illogical to suggest that the dollar is forming a base to rise to new highs; such a notion is highly improbable. Therefore, the outlook that the dollar will continue to consolidate in the intermediate time frames is more likely to be accurate.
In terms of currency performance, currencies like the Australian dollar (AUD) and the Canadian dollar (CAD) are expected to outperform the US dollar (USD). However, it’s important to consider the overall gains one can achieve by investing in the US markets. Profits from other currencies may not be significant unless one invests in equally strong stocks in countries like Canada or Australia.
Expect Dollar Strength, not Weakness
After the current consolidation period, we anticipate the US dollar to bottom out and start trending higher. If the dollar achieves a monthly close above 105.00, it will likely pave the way for testing the range of 116.70 to 118.00, with a strong possibility of reaching or surpassing 120.00. It’s important to consider the impact of artificial intelligence (AI) and related technologies on future earnings, where the US is a dominant player. Additionally, the medical industry, particularly the biotech sector, will utilize AI to develop new life extension therapies. Therefore, the narrative of the dollar’s demise is becoming outdated.
Regarding gold, it is unlikely to surge beyond $5,000 as envisioned by gold bugs. Our extreme target for gold trading would be around $2,500. Precious metals, from a long-term perspective, are expected to continue an upward trend. Allocating a portion of one’s funds to bullion is reasonable, but going all-in on this sector would be a risky move that may require reassessment.
Other Stories of Interest
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The Future Of AI (July 1)
The Angry Mob & The New Polarised World (June 16)
Social Unrest And The US Dollar (June 15)
Bear Market History: Buy The Bear Sell The Euphoria (June 14)
Shorting The Market: An Endeavor with Poor Risk To Reward Profile (June 1)
Stock Buying Opportunity Courtesy Of Coronavirus (May 31)
Market Trends: Focus on Fact And Not Fiction (May 30)
Paradoxes: The Scorpion And The Frog (May 14)
