Another 48h - DXY False Breakout Downtrend Between Annual Highs
2024/12/08
Another 48h - DXY False Breakout Downtrend Between Annual Highs
“a trend reversal formation between the annual highs of 2023 & 2024!
is it going down any further now? if so, how deep? and/or if, how long?”
Passing the French budget is so difficult because, on the one hand, the government does not have an absolute majority. And therefore cannot rule as they want - like Trump in 2025, for example. And that means that every point has to be negotiated with RN or the left-wing block Nouveau Front Populaire (NFP). On the other hand, the strained state of public finances means that French premier Barnier will have to make difficult and unpopular decisions to reduce the deficit from 6 percent to 5 percent of GDP in 2024. Barnier has proposed a €60 billion consolidation package that he claimed would mostly be spending cuts. In reality, it relies heavily on tax increases. However, “Europe's center is not holding”, as Anatol Lieven pointed out today very well in his article on Responsible Statecraft. As he started with “The collapse of the government in France and the ruling coalition in Germany spells continued crises — and don't think war has nothing to do with it.” Anyway, this is unacceptable for the RN and the NFP, which both came into power in the summer with the promise of increasing the purchasing power of the French. President Emmanuel Macron's center-right alliance and the center-right Republicans, who nominally support Barnier's government, are also resisting. With little room for maneuver, Barnier has said he will likely be forced to use a constitutional procedure known as 49.3. The process allows the government to pass laws without a parliamentary vote, but it leaves them open to a motion of no confidence. The Left Bloc has promised to submit such a motion, and now the RN could give it the necessary votes. And that could happen as early as this week, when Parliament votes on a social security funding bill included in the budget, or later this month. Because the French budget must be passed by December 21st.
Yesterday, on Saturday, Trump was received by Macron in Paris with presidential pomp and was accompanied by Zelensky to the talks. French President Emmanuel Macron welcomed Donald Trump to Paris with a full dose of presidential pomp as the two held an arranged meeting with Ukrainian Volodymyr Zelensky before celebrating the grand reopening of Notre Dame Cathedral. A good and or also hopeful sign, meeting at the end of 2024 that gives hope for the year 2025. Now all that remains is for Russia, in whatever person, to take part in the next meeting! Anyway, Macron is turning the big wheel of current political history - because things are not going well with public finances at home in France. Because on Monday of the last few weeks, his country French borrowed 8.3 billion euros, on the financial markets. The 10-year yield on French government bonds is currently more or less around 3 percent. At the height of the first euro debt crisis, the yield on Greek government bonds climbed to over 16 percent more than 10 years ago. The Greek economy was collapsing at the time, which was made worse by the strict austerity measures, primarily from Berlin and Brussels. Athens engaged in a brutal fiscal and monetary policy battle with Berlin and Brussels over the terms of a eurozone rescue package. And today? Today is also a disaster - with even greater numbers! Simply due to the fact that France and Germany also have more than 80 million taxpayers and/or consumers each. Nevertheless, during the recent political turmoil in France, the gap between France's debt and Germany's debt increased by just 0.3 percentage points. And traders and/or investors do not seem to be panicking (yet) due to the fiscal policy uncertainties. But the combination of political paralysis and difficult public finances is unsettling - no question about it! The public deficit is likely to reach 6.2 percent of GDP. Paris is therefore under pressure from the markets and the EU to take corrective measures. Even though France has not had a balanced budget for five decades, the country has reached a point, in 2024, where it can no longer rely on economic growth to maintain debt. However, several political scenarios are possible for the coming week, this month of December 2024. The day after the New Popular Front (NFP) and the neo-fascist National Rally (RN) brought down Prime Minister Michel Barnier’s government and attacked President Emmanuel Macron, several parties in the NFP carried out a 180-degree shift in strategy. They eagerly seized upon Macron’s invitation to the NFP to come to the Elysée presidential palace for talks, declaring themselves open to forming a government with Macron. Despite this, I am not giving up hope of an agreement and that's why we let our long 1MC 4XSetUp going, and going, and/or going! Hopefully until the price target!. But go so far and formulate a new long EURUSD 4XSetUp? I don't want to go that far (yet)!
- 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.
“Markets are constantly in a state of uncertainty and flux and money is made by discounting the obvious and betting on the unexpected.”
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
106.517 : 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
105.970 : 2024/12/06 - last price action
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
In addition to the annual highs in 2023 and/or 2024, inclusive the breakout from the w trend reversal formation, two downward trend lines from the annual high in 2024 are also interesting. Because the price action above proves the fundamentally positive bullish upward trend in the
DXY . And/Or even the breakout of the downfall trend from the first both annual year highs 2024. While a downfall around the two downward trend lines from the bears, between 106.5 and/or even 106 points, in retrospect we must have to speak of a short-term false breakout of new annual highs in 2024. And that even happened last days and/or weeks meanwhile. From this point of view I expect US bulls & US Bears to trade and/or invest in the terrain between the both downside trends, more or less, until the end of this year 2024 - i.e. between 106 & 105 points. Nevertheless, I remain more bullish than bearish for the DXY as long as the price action is above the w trend reversal formation. 
EURUSD is quite weak - totally damaged in terms of fiscal policy and economic policy. But the Japanese yen may strengthen as inflation in Japan did not come down as much as most expected. Which is why I closed our long USDJPY 4XSetUp with a loss at the Friday closing price on November 29, 2024.With best wishes
and with good intentions!
Aaron
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