Market realities are putting pressure on the dollar, notes Jeff Greenblatt.
A little over two weeks ago I showed you the long-term monthly U.S. Dollar chart, which peaked at 144 months for the first financial crisis low in 2008. Since then it hit a good Kairos reading at a 48% retracement at 46 bars on a 180-minute chart. In the near term, the technical damage is building. Longer term technical damage to a pattern doesn’t happen all at once, it happens in stages. Aside from the square out readings, I use strange attractor lines, also known as magnet lines.
These lines act as magnets. First, they attract, then they repel. If I showed you how accurate they are on a one- or five-minute chart, it would transform the way you look at patterns forever. We have a violation of the near-term line going back to January. It still has not breached the longer-term line which goes back to 2018. That’s the bad news. The good news is the pattern could ground itself between the two lines for an undetermined amount of time. The longer-term line held right on the line this morning. If it slices through, the greenback is going to have major problems right now.
Last week, I came here very concerned about the average American because this is the general public. We are the people who make this country work. The good news is the stimulus checks appear to be rolling. It will keep people rolling for a little while. But the economy is going to need to be reopened no matter what happens. Why? Word is leaking out there is danger in the food supply chain. According to numerous sources, Representative Thomas Massie (Rep. Ky) warned of a “brittle” supply chain which is bankrupting farmers and forcing them to euthanize livestock. “We are weeks, not months, away from farmers euthanizing animals that would have been sold for meat/food. Also, fruits and vegetables are going to rot in the fields. A drastic change in policy this week could ameliorate this inevitability,” he tweeted this week. He also stated at least six giant meat processing plants have shut down, including one that processes 1900 cattle per day. This affects cattle and hogs. As you can see from this long-term Lean Hogs chart, prices have collapsed (below).
Quarantining and shutting down the economy to save lives? Even Dr. Anthony Fauci admitted he is humble enough to know there were other options. But what happens when the people who work in the meat packing plants are not on the job? It doesn’t take a rocket scientist to figure out we are close to the cure being worse than the disease. According to many, the cure is already worse than the disease.
How about crude oil? According to numerous sources a deal was reached between the Saudis and Russians for a production cut. Have you looked at an oil chart? It hasn’t helped (see below). The problem is complex. The world has plenty of oil, what we don’t have is demand. They could cut production all they want but unless they stimulate demand nothing is going to change. Sorry to say, many politicians have no clue as to how economics works. If the global economy is closed, where is the demand?
How many of you are old enough to remember the old Candid Camera show? Here in this 1963 episode an officer told motorists the state of Delaware was closed. People turned around and went home. Back then it was a joke, this time it’s not funny. Somehow, this is all tied to the dollar because of the petrodollar relationship. Nations must exchange their currencies to U.S. dollars in order to buy oil. That’s what keeps the U.S. dollar going. What if the lack of demand continues? Well, you can see for yourself on the chart (see below). Simply put, if there is no demand for oil, there won’t be much demand for greenbacks either. What we are experiencing is a massive deflation, which is being offset by the Federal Reserve’s massive hyperinflationary actions just to keep the ship from being obliterated by the iceberg.
Right now, there is no economy, there is very little velocity of money. What could pick it up? At some point foreign investors will realize they’ve invested in a 10-year note that has little buying power due to all the Fed activity. Lots of dollars out there, not a lot of places to spend it.
Did you see the headline on Wednesday? Politicians are now considering another round of stimulus that would pay individuals $2,000 a month. The Fed can keep this up until they print themselves out of value. When will that be? When institutions start dumping bonds. That would not be the kind of velocity we are looking for.
Unless there is a major rally in oil, it’s unlikely we get a major rally in the dollar. If they reopen the economy, that will change the demand scenario. Right now, we don’t see it. The stock market rally has hung on with the Dow Jones Index just over a 50% retracement and is likely still going higher.
If you want more information, go to: Lucaswaveinternational.com and sign up for the free newsletter.
