Another 48h - DXY Around December 2024 Highs Today
2024/12/12
Another 48h - DXY Around December 2024 Highs Today
“ECB cuts interest rates as expected by -0.25% during this hour!
but what's the point of the +3.0% in the inflationary US PPI today?”
The Eurozone continues to show economic weakness, as confirmed by the Sentix economic indicator, which reached its lowest level since November 2023. A recession is becoming increasingly likely, especially due to the weak situation in Germany and the political situation in France. Ahead of the Fed's interest rate decision next week, investors were eagerly looking at US inflation data, which is seen as an important indicator for the dollar's watch dogs. Accordingly, the inflation rate in the USA rose from +2.6% to +2.7% in November. The ECB will meet for its last meeting in 2024 today on this Thursday, December 12th, 2024. Market observers are assuming a key interest rate cut of -0.25% (me too). Because I basically perceive the
DXY in the same way as Mohamed El-Erian. When he formulated four weeks ago that a growing economic gap between the USA and Europe could further weaken. “If you look at the good, the bad and the ugly of the global economy, unfortunately Europe is the ugly,” El-Erian, the president of Queens’ College, Cambridge, said on Bloomberg TV four weeks ago. To which I can only add that, for better or for worse, the foreign exchange market and/or the stock markets seem to have more or less understood the economic divergence in favor of the USA. Especially under Donald J. Trump's watch, the year 2025 should certainly not allow for any divergence in economic policy in favor of our Euro Zone. As a logical consequence, a divergence in monetary policy should then follow? But I don't want to think about it that far today (yet)! But let's wait until today - and the end of 2024. Until Trump is back in the office in January 2025.- Will the bulls recapture the terrain above 106.517 points again?
- Will the bears recapture the terrain under 104.447 points again?
Those were the two questions last calendar week - to learn something! And what have we learned? Both bears and bulls were not that strong. Looking back, I may have to admit that, for better or worse, I defined the price action a little too far apart. But I think we should give ourselves time until 2025. Even until January 20th, when Trump is officially back in the office. Because then the cards are shuffled again as far as the price action is concerned. And until then, we should continue to be content with the same question. Because the price action between 107.348 points (Annual Year High 2023 from 2023/10/03) and/or 106.517 points (1st Annual Year High 2024 from 2024/04/16) are groundbreaking. Last week before the bears took over. pathbreaking for last week, and/or this week after
DXY closed at 105.970 points this weekend, after last weekend 105.782 points. Which is why it looks like we will see a DXY down to 104.447 points from Friday, the 2024/08/02.
“Economic theory is devoted to the study of equilibrium positions. The concept of equilibrium is very useful. It allows us to focus on the final outcome rather than the process that leads up to it. But the concept is also very deceptive. It has the aura of something empirical: since the adjustment process is supposed to lead to an equilibrium, an equilibrium position seems somehow implicit in our observations. That is not true. Equilibrium itself has rarely been observed in real life - market prices have a notorious habit of fluctuating.”
George Soros
- Will the bulls recapture the terrain above 106.517 points again?
- Will the bears recapture the terrain under 104.447 points again?
It looks like we will see a
DXY down to 104.447 points from Friday, the 2024/08/02 because a price action until this price action zone and/or even below is definitely within the scope of probability. Because looking back, between the annual highs of 2024 and/or 2023, we can now see something like a bearish trend reversal formation in the DXY chart. Admittedly not as big as the bullish trend reversal formation - but at least a bearish counter reaction to the previous bullish one. And this could send the DXY even until around and/or down under 104.447 points from Friday, the 2024/08/02. When fears arose in the financial market that the US unemployment rate would skyrocket, the Fed would have to cut interest rates to prevent an US recession, and as a result, US inflation would inflate again - and we were nevertheless cyclical as history tells us still fall into a US recession. However, will it happen? It will be like it will be! And/Or allow me to use the words of El-Erian: “Fed Will Be Comfortable Cutting Rates”, as you can hear on Bloomberg Surveillance Podcast, from last Friday, as the last US unemployment rate came out.108.071 : 2024/11/22 - Annual Year High 2024
107.348 : 2023/10/03 - Annual Year High 2023
106.723 : 2024/12/12 - last price action
106.517 : 2024/04/16 - 1st Annual Year High 2024
106.490 : 2024/05/01 - 1st False Breakout To New High
106.130 : 2024/06/26 - 2nd False Breakout To New High
104.799 : 2024/07/30 - High Before W Trend Reversal Formation
104.426 : 2024/08/02 - High Of The August 2024 2 Day Sell-Off
102.160 : 2024/08/03 - Low Of The August 2024 2 Day Sell-Off
Be that as it may, both US inflation data from yesterday and/or PPI data from today have not signaled a decline in inflation in the USA. Let alone we can except lighter US inflation on top of that - but I don't want to be too pessimistic either. Let's wait for next month to better understand the big picture. But today there is no reason to sell the
DXY because of these both last data.However, earlier at start of this week,
the two-week downtrend was broken to the upside.
And something like a small bullish upward trend has developed since then. Since the low of this trend, which was in the hour during the last publication of the US unemployment rate last Friday, we have now been heading towards new annual highs for 2024 for 4 days of green bullish trading days. But slowly - carefully - stop! First of all, the US bulls have to overcome the previous December highs in 2024. Namely the terrain described below. Because then the way could be clear for the annual high in 2023, at 107.348 points, from 2023/10/03. And that all while the ECB holds their press conference during this hour. And/Or the US PPI data year-on-year came out. The ECB (European Central Bank) has decided to cut its key interest rates for the fourth time this year by 25 bps in December 2024, as expected. But the US Producer Prices Index increased +3% in November 2024 over the same month in the previous year. From this pov (point of view) the fear of a renewed increase in US inflation for 2025 is not (yet) off the table! On the contrary - a blast, as we recently had +2.6% and were also expecting +2.6% for today. But a hefty +3.0% was released! The biggest increase of the whole year 2024! Anyway, don`t panic now. Let us wait for the price action today - and find out will the us bulls a tailwind mark new December highs for 2024 today
DXY ? So that we can tomorrow, looking back, and get a new (old) picture of the past, present and/or future of the price action in the TVC:DXY. That`s why take care today of the previous December 2024 highs.106.731 : 2024/12/02 - Monday Intraday High
106.723 : 2024/12/12 - last price action
106.602 : 2024/12/03 - Tuesday Intraday High
106.720 : 2024/12/04 - Wednesday Intraday High
106.637 : 2024/12/10 - Tuesday Intraday High
106.806 : 2024/12/11 - Wednesday Intraday High
With best wishes
and with good intentions!
Aaron
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