Macroeconomic insight using graphical analysis

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In this episode of the “Fed Watch” podcast, we focus on the important macro charts. We cover bitcoin chart, currencies like dollar, euro, HK dollar and gold as well as energy commodities. We didn’t have time to access all the graphics I prepared, as the live show has time constraints. I will try to release a second part this week to cover the rest of my product charts, as well as supply chains and shipping costs. You can find the slideshow of graphics here.

Other topics covered in today’s episode include yesterday’s meeting of President Joe Biden and Federal Reserve Chairman Jerome Powell, where I try to flesh out the significance of this confrontation between Wall Street (Powell) and the globalists (Biden), and we get into a few things from Davos last week, in particular Kissinger’s comments on Ukraine.

“Fed Watch” is the macro podcast for Bitcoiners. In each episode, we discuss macroeconomic news from around the world with a focus on central banks and monetary issues.

Currencies

The first currency we are talking about is bitcoin. I discuss the recent Memorial Day price surge and how it is concurrent with growing bullish divergence in indicators.

However, I also go back in time to about a year ago when there was a very similar situation. In June 2021, there was a bullish divergence of these two indicators and a breakout of a falling wedge. This decision was a false exit, interrupted by the wave of grayscale unlocking (GBTC) in July. The current situation is similar on the chart, but not similar in the fundamentals. I just wanted to point out a previous example where a breakout like this week failed.

I’m making an effort to dislodge the “rising bitcoin equals falling dollar” false narrative here. The dollar and bitcoin may rise together due to deflationary pressures causing people to cash in and move away from counterparty risk.

The next step is the dollar. On the live stream, I show the following chart and explain how we might be heading for a new higher range on the dollar. Perhaps we see another five to seven years of the Dollar Index (DXY) in the 100-110 range, much like how it jumped into the 90-100 range in 2015.

Dollar index chart with technical analysis (The source)

For those who don’t like DXY because it’s too narrow (euro 57.6%, yen 13.6% and pound 11.9%), I provide a trade-weighted chart of the dollar that includes more than 30 currencies, including Chinese yuan and Mexican peso. .

In the chart below, we see the same start of consolidation, but the top the dollar hit (excluding the COVID-19 crash highs) is a new high. I think it also symbolizes a higher step function for the trade-weighted dollar.

An in-depth look at various currencies and their charts as well as observations on energy commodity prices and how they are affected by world events.

Trade-weighted dollar with more than 30 currencies (Source)

Remember that a strong dollar is the failure of the Fed and also puts considerable stress on the rest of the global economy.

The Euro is almost the inverse of the DXY. It also shows a recent breakout, but in this case downside. If the USD rally needs to consolidate before heading higher, the EUR will consolidate before heading lower. One thing is for sure, the Euro has broken its two-decade support trendline and it is in deep trouble to crash much lower.

An in-depth look at various currencies and their charts as well as observations on energy commodity prices and how they are affected by world events.

Chart of the Euro against the US Dollar showing a break down (The source)

The following two charts show the Hong Kong dollar against the US dollar. There is an anchor in place which is quite evident on the first chart: it is a range between 7.75 and 7.85. Recently, the exchange rate has reached the top of this fixed range, signaling massive dollar pressure in Asian economies such as China, Hong Kong, Taiwan, Japan and South Korea. The dollar compression started quickly this year.

An in-depth look at various currencies and their charts as well as observations on energy commodity prices and how they are affected by world events.

Monthly chart of the Hong Kong dollar against the US dollar (The source)

The second chart of the Hong Kong dollar is a close-up of the daily timeframe. The peg has been successfully defended this time, with authorities selling US dollars and buying Hong Kong dollars, but the big question is whether they have enough reserves to continue defending this peg for the rest of the year. year, as they did in 2018?

An in-depth look at various currencies and their charts as well as observations on energy commodity prices and how they are affected by world events.

Daily chart of the Hong Kong dollar against the US dollar (The source)

Hong Kong authorities are releasing their reserve data, so we can get an idea of ​​the severity of their predicament. At the end of April 2022, before the peg came under its greatest pressure, their reservations was $465.7 billion, down $16 billion from March.

The last currency we look at is part currency and part commodity: gold. It’s been hard being a gold bug for the past 11 years. Currently, the price of gold is below the 2011 high of $1,920, sitting at $1,840 at the time of recording. Imagine, holding gold for 11 years and losing money despite the money printing narrative. Your choice at this point would be to either give up your mistaken inflation dogma or go crazy with conspiracy theories. That sums up the gold community at this point, in my opinion.

An in-depth look at various currencies and their charts as well as observations on energy commodity prices and how they are affected by world events.

Gold spot price from April 2021 to May 2022 (The source)

Energy products

Moving on to commodities, in this episode I only have one chance to cover two charts. The first is Brent crude (UK crude price in orange) and West Texas Intermediate (WTI) crude (US crude price in blue). They are often highly correlated, with a slight premium over European Brent.

I wanted to cover this chart today, because of the headlines about the sixth round of EU sanctions against Russian oil; this is an absolute joke. As you can see from the graph, the orange line actually falls on the day the theatrical sanctions were announced.

An in-depth look at various currencies and their charts as well as observations on energy commodity prices and how they are affected by world events.

Brent crude oil and WTI crude oil prices (The source)

My thesis on oil prices is this: global demand is collapsing faster than oil supply. The recent high prices from March 2022 are due to the conflict in Russia and Ukraine which has caused market uncertainty. Oil is very overbought. The price of oil will soon begin to fall, pushing down prices and the consumer price index (CPI), and coinciding with a slowdown in growth. This is not a stagflation scenario, it is a deflationary depression scenario after a temporary price spike.

European natural gas futures support my conclusion. They were dramatically elevated, well above rational market fundamentals outside of the Russian sanctions. Russia has refused to be affected by successive rounds of sanctions, and the chart tells us that these price levels are mainly due to people’s worries, not market fundamentals. Once these concerns dissipate (when the end of the situation in Ukraine becomes clearer), prices will quickly adjust lower.

An in-depth look at various currencies and their charts as well as observations on energy commodity prices and how they are affected by world events.

European natural gas futures contracts (The source)

That’s it for this week. Thank you readers and listeners. If you like this content, subscribe, review and share!

This is a guest post by Ansel Lindner. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.

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