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February 1, 2021 | USD Support Warns Risk-Rally

Danielle Park

Portfolio Manager and President of Venable Park Investment Counsel (www.venablepark.com) Ms Park is a financial analyst, attorney, finance author and regular guest on North American media. She is also the author of the best-selling myth-busting book "Juggling Dynamite: An insider's wisdom on money management, markets and wealth that lasts," and a popular daily financial blog: www.jugglingdynamite.com

Between March 23 2020 and January 5, 2021, the US dollar index (greenback versus the Euro, Yen, Pound, Cdn$, Swiss franc and Swedish krona) fell 13.2% to test long-term support in the $89 area as shown below in my partner Cory Venable’s chart of December 31, 2020.

As the dollar fell, risk-assets on the other end of the global teeter-toter rose and dollar bears became ubiquitous with traders and asset managers the most dollar-short coming into January since 2006, as shown below.

When everyone agrees, something else tends to happen, of course, and since January 8, while the dollar index has quietly strengthened, stocks, commodities and cryptocurrencies have lost ground.

As shown below in Cory’s chart since 2000, at $90.50 starting February, if the oversold dollar (in red) continues to rise for a bit, the risk-on mania that has dominated since March should be in for its next round of comeuppance (S&P 500 price in blue).

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February 1st, 2021

Posted In: Juggling Dynamite

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