Why The US Dollar Will Continue Much Lower...
The US dollar will continue much lower over the coming year and perhaps beyond. Here's why:
- The US economy is weakening more that other major countries
- The Fed will ease sooner than other countries
- Inflation differentials are going against the dollar
The US economy is leading the world into a global recession (ex-China). The Fed tightened sooner and more viciously than other countries and so will hit a recession sooner than other countries.
Actually, the US has two negative quarters last year and I believe that 1Q2023 will go back into a recession. Manufacturers are already in a recession and Consumer Spending just dipped slightly below zero growth year over year.
I then look for the English speaking countries to fall next: UK, Australia, Canada. All of them were way overleveraged to housing and they are raising interest rates fast enough to shock the housing markets in those countries.
Finally, we will see the rest of Europe and Asia fall.
We will see China and Japan as last in the dominoes.
As a result, the US economy will be weaker than other countries and reduce the demand for dollars.
But having the first big economy into recession will mean the Fed will be the first to stop rasing rates and first to ease. Thus, the relative supply of dollars to other currencies will start to increase. More supply means lower price of the dollar.
Right now, inflation is still higher in the US than other countries. This means that the external value of the dollar is declining so the price of the dollar should follow this decline in value over the coming year.
These are the three biggest factors that affect the price of a currency. Last year they were bullish on the dollar and I told you to buy the dollar over a year ago.
Over a month ago, I told you to sell the dollar. We are still near the beginning of the Big Bear in the dollar.
So the obvious way to make money is to short the dollar. For me, I would focus on shorting USDJPY. There are also ETFs that allow you to do the same thing. You can also consider buying Japanese stocks because you should make money on the stock and the currency.