Well, USD never did give up the 2021 rally despite the re-pumping inflation trades. It is apparently getting the Fed taper bid (Lael Brainard is talking it up) and taking the rise in Treasury yields as supportive.
Here is Uncle Buck making a new try to take out the previous cycle highs. The “dollar collapse” cult must be beside itself. We however, will not be surprised.
Fellow rider of liquidity destruction the Gold/Silver ratio also maintains its uptrend. With gold and silver down in pre-market let’s also keep in mind the positive CoT setup shaping up in silver and the middling one in gold. At such time as silver bottoms (as per previous work, next downside target is 21.23 and best target is 18.90) we could have a firm bottom for a strong rally at least in the precious metals complex.
On the bigger picture the breakouts in 10yr & 30yr Treasury yields that we noted in NFTRH 674 are following through. Right now on the immediate knee-jerk the market is choosing to fear that, but the signaling is inflationary and in my opinion likely forward-stagflationary. A heavily indebted economy will only take so much of it. This is what happens I suppose when something that was repressed in order to manufacture inflation receives a jawbone pretending to be anti-inflation (they are of course, not).
Best now to let the process unfold as I for one know I have no ability to reliably predict the twists and turns to come. Hence, cash. Hence, ongoing analysis. Hence, opportunity that cannot be rushed, but should arrive when enough pain has been dished out.
One option among several is that the precious metals could bottom first amid a liquidity problem and lead broader commodities and markets higher when we clear the spooky seasonal. But again, it’s not a time for predictions or bias. So I am going to take this week-by-week, defaulting to cash and staying clear headed about it. The macro is in motion and really that is all I ever asked for after the robotic inflation trades and subsequent cool down of 2020 – 2021.
