Thread by @RaoulGMI

Following on from Brent's excellent tweet storm on the Dollar, which I totally agree with (apart from his dollar bear bating!)

https://twitter.com/SantiagoAuFund/status/1270143476194111492?s=20

I wanted to add some charts to make you think. Just because chart patterns are there, doesn't make them a shoe in, it just increases the probabilities. The last pattern of the smaller wedge pattern failed (which was painful but part of the Great Game).

There might well be an expanded ABC channel at play in the Euro...

Which is also the top of the larger channel...

The Daily DeMark count suggests a possible reversal...

The Bloomberg DXY has just tested its break out and there is a lot of support here...

And the really big support is only 1.4% away, if it gets there...

The gorgeous chart of the Fed US Broad Trade Weighted Dollar Index has fully re-tested the beak out of the big cup and handle pattern....

The Fed have added $3trn but the ECB only $1trn so far They have another $500bn announced. The Fed have been front loaded (hence the recent $ sell off) and the ECB back loaded, as ever. With deflation hitting EU soon, they will have to step up, thus weakening the Euro.

When adjusted for daily FX liquidity, the ECB balance sheet is due to expand at a faster pace than the US.

But in the end, it all comes down to rates, as ever. Falling rates are bullish for the dollar. They lead by 3 days.

The dollar is also an expression (like rates) of the risk of insolvency. The dollar and the GMI Index of the largest BBB debtors by sector are essentially the same chart...

And the dollar vs the BKX, for the same reason, is the same chart...

And that is also the same as the EU banks....

And that brings us back to rates - are they going up or down? If they go down, they are suggestive of dollar strength, weaker credit and weaker banks. My guess is that the Chart of truth holds and 2 yrs go negative in the next 12 months, maybe sooner.

And inflation is set to turn to deflation both in US and EU. Here is the US CPI vs. Velocity of Money...

And of you don't like Velocity of Money then here is ECRI vs CPI...

Or even core CPI vs US Births Deaths (the demographic deflation)

2 yr real rates are already up 200bps and are at zero, but that is set to change and they will flip to very positive...

And that all suggests if rates stay at zero, real rates will soon be as high as they were BEFORE the 2001 and 2008 recessions (using Fed Funds). Hence the need to go negative over time.

The charts, rates, debt, banks, relative liquidity of currencies, CB printing and real rates are all additional parts of the dollar strength picture. Again, Brent and I could be wrong but I favor our odds very much still.

The Great Game is a long one.

One or two months price move of a weaker dollar are still probably noise in a much, much bigger picture. I think it goes higher. Much higher still.

Time will tell.