As the US dollar bounces sentiment is bouncing with it
DXY took out the SMA 200 a few days ago as the 2021 rally continues. In having cleared that moving average the next objective is the mid-high 94s. It will remain in its downtrend if it holds below the September high (blue). If it takes that out you can say goodnight to the reflation/inflation trades.
Sentiment appears to line up well with the prospect that USD would hold at or below resistance and fail, as the Public Optimism Index (Sentimentrader) is far different than it was at the lows. While not yet extreme, it sure could be if USD reaches the mid-94s. That would especially be true if the anti-USD/pro-inflation/reflation stuff continues to be pressured in the near-term.
Sure, 77% of the public is or was recently afraid of inflation. But that is already being tamped down by the dollar’s rally and the routine pullback in various commodities. We may yet end up with a whopper of an inflation problem, but nothing goes in a straight line in the markets. Inflation and sentiment included. *
The Fed has printed and politicians are scheming to continue cost-pushing grotesque amounts of funny munny into the economy. The goal is inflate to beat the band. But sometime before 2021 ends I expect the decision point on the Continuum to advise whether the public’s fear of inflation will be well founded or just another perfect contrary indicator.
You might want to watch the media and its promotions of the two bond kings, BOND KING the greater and bond king the lesser. The public, after all, takes experts – especially those anointed by the media – very seriously. The USD bounce meanwhile, may well be the calm before an inflationary shit storm (and macro decision point).
* Check that. If inflation starts to run away into a Crack Up Boom, we could be looking at a parabola of hyper-inflationary angst. But again, the macro decision point will advise.
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