Dollar's Back: "Double Bottom" and "Smile Theory" in Action

30 сент. 2021 г.

The dollar yesterday updated its maximum levels for the last year. In general, the breakdown of the 93.50 Dollar Index seems to be a very serious application for the start of an uptrend. The formation of the “double bottom” reversal chart pattern is officially completed and the road to growth to the area of ​​100 is open before the “evergreen”.

Naturally, a foundation is needed for a sustainable trend. It is the transition of financial markets from the stage of denial of the fact that the Fed is going to tighten monetary policy to the stage of adopting it.

An emerging consensus: the asset buyback program will be phased out in November, and the first rate hikes will begin by the end of 2022.

And despite the fact that Powell continues to try to sit on two chairs, maneuvering between the job market and inflation, even he officially admitted this week that inflation was not as temporary as he previously argued.

Another reason for the growth of the dollar is described by the "smile theory", according to which the dollar grows in good and bad times, but in the times between these states with growth it has problems. Although this theory is better described by real economic ties. In this case, it all comes down to those moments when the growth rate of the US economy is higher / lower than the global one.

In general, the current conditions favor the smile of the dollar, especially considering that yesterday the Chinese developer Evergrande missed the next payment. If last week the company had to pay off its obligations for $ 80 + million and could not do it, then this week the story repeated itself with another payment in the amount of about $ 50 million. That is, the situation is not only not resolved, but continues to deteriorate with everyone from here resulting.