| The 0.75 interest rate hike was well flagged and is now in. Whilst initially some people have interpreted dovishness in the Fed’s comments the dollar has reversed strongly to the upside after a volatile session against the yen on the dollar index (made up of the Euro, the Swiss franc and the Pound). Across the board we are seeing clear rejection candles of the downside and strong strength to the upside for the Dollar. DXY 4H Volatility over FOMC |
| This continues to confound people that called tops on the Dollar and tops on inflation. We continue to reassert: once through 5% inflation, you do not rein back inflation to 2% by having interest rates that are lower than the inflation rates. It has never happened in all of economic history! To rein back the inflation rates, interest rates technically would be required to be higher than the governing inflation rate. They will need to continue to raise rates, although the rate at which they raise rates may slow. Inflation however, will remain stubbornly high. However, given the debt situation, those levels of interest rates are absolutely implausible and if we were to go to those rates in a flash in one day, we would have absolute and full systemic collapse through derivatives and through loss of value in the bond markets. As can be observed with the US dollar dominance, the Dow which has been more robust than S&P and the index is rejecting down; the Nasdaq is rejecting down; the gold paper price is rejecting down. Most risk on assets are turning down, including cryptos. We have continued to assert the new markets of significance are the debt and FX markets – FX markets being the new “crypto markets” with the Dollar dominant. Understanding what the Dollar does next is the most important thing you can do for whatever market you are trading. Dollar and debt markets are the macro game. Despite this reversal upwards in dollar strength after a benign period, Oil remains strong with the WTI contract at $89.32 and Brent at $95.60. Across the planet there are shortages of diesel with America on its last 25 days of supply. Across the world we will continue to see stubbornly high energy related prices which is a driver of inflation and an indirect tax on your net disposable wealth. Central bank created inflation and the Green/Carbon agenda are further taxes eroding your wealth. Trading is one of the best ways to build wealth during these reset times providing you have a real method and understand the principles of money management. For those who don’t trade, investing appropriately to not lose your money in these Reset times and to preserve capital for both your family and your future generations is the most important thing you can do in this current era. There is far less time left on this current economic system than many people realise. The final bonfire will be exceedingly destructive. It’s time you took action! |