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USD Currency index is going down! Here's what it means:

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Since the March covid crash, we have been seeing that almost all the assets have made impressive recoveries, Equities are again approaching their previous highs, Gold, Silver and other precious metals are going through the roof, and now, cryptocurrencies are also making some waves!

Let's have a detailed analysis on what exactly is happening, from a different perspective.


I'd like to introduce the USD index here.

The U.S. dollar index (USDX) is a measure of the value of the U.S. dollar relative to the value of a basket of currencies of the majority of the U.S.'s most significant trading partners. This index is similar to other trade-weighted indexes, which also use the exchange rates from the same major currencies.

Source: https://www.investopedia.com/terms/u/usdx.asp

So basically, the dollar index going up means that the currency is strengthening, and the index going down means that the currency is weakening.

Have a look at the chart below, for reference:

Chart: DXY, 1W

Link: https://www.tradingview.com/x/zVTGOLnX/

On drawing the weekly trendline support, we can see that it is currently attempting to break below the support, and has almost succeeded in doing so.

Here's a bonus point: There's word that Goldman Sachs shorted the dollar index, and I'm sure they will continue doing so

Well, the key takeaways from this is:

  1. If Dollar index starts tanking, it will only mean that the commodities and bullion market will go up.
  2. In case of equities market, its a bit different, and a good explanation is provided here
  3. The long-term effects can be more devastating than just the prices going up. You don't want to gain 5% on an asset, only to see that the purchasing power of the dollar has gone down, and you end up cancelling all the real gains.
  4. Also, with cash being less valuable, equity and commodity traders will be less willing to sell.

Have a look at the correlation between the index and gold:

Image Source


Now I did cover a brief analysis on Gold and the Same theory applies to Silver as well, and I covered a short Wyckoff analysis on that

So, do click on the links to check out my previous posts if interested! :)

The bullish scenarios on Gold and Silver align with the tanking dollar index, and this article is one reason supporting that claim!

At present, both the precious metals are showing impressive strength, Gold already printed a solid weekly bullish candle, and now we are seeing a breakout on Bitcoin as well, which I believe should be good for the overall crypto market in the near future!

If you believe that the tanking of USD index is good for the markets, it may look good on the charts, but do have a look at some of the terribly weak currencies in countries like Zimbabwe, Turkey, Venezuela. You don't to be a worthless millionaire holding bags of paper money right? :)



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