DOLLAR STRENGHT: TRADE SMART USING CORRELATION (bullish)

2022年9月16日

Hello traders this is a point of view, not a financial advice .

For now, DXY has more room to the upside. In my opinion the FED will hike higher and for longer than most think and in terms of an overall economic downturn.
By other side, I don't think we have seen the bottom in the market. (For reference the most probable outcome for FED rates in March - May is 425-450, I think it'll be 5)

The BOE on the other hand, I don't think will be as aggressive on hiking taking a more dovish approach and creating a softer Pound. (GBPUSD) The Dollar is also a safe currency. UK Assets are also not seen as attractive as US assets and money will then now be flowing out of UK or EUR assets exacerbating the issue further.

Bank of America do predict that GBPUSD could fall as low as 1.11 and in a worse case fall below 1.10. The UK is facing growth issues, and this has been materially worsening over the years, even before COVID. As I said, UK assets are sometimes seen as more risk assets therefore will only be bought in times of confidence so until then we could see the pound under pressure. Of course, we can talk about this is great depths by comparing current account deficits, interest rates etc. etc and really getting a long-term fundamental macro view.

In that way I still holding my bearish biais in most of .../USD and bullish biais in most of USD/... Other important element to keep in mind is that next week we will have interest rates decision either they hike or hold that will bring bullish momentum to the dollar!