My feeling is that we are currently seeing the best the stock buyers can muster.
Expect some initial strength first thing Monday morning, but this is unlikely to last.
In other words, it is a heavy consolidation phase, which, should we drop out of the bottom with another fresh low, will result in a further 3% to 9% sharp fall over just a few days.
I think it is all coming together with a US dollar resuming an upward march based on US corporations recalling capital from around the globe and the internationally mistaken belief that the greenback remains a safe haven.
It is not a tearaway view that US society is in decay just now. Tearing itself apart. As the primary cause of death of 18 to 44-year-old adults becomes drug overdose. What a sombre reminder as to how excess can lead to indulgence and then decline.
There is still a lot that is right with the USA. Much that is failing too. Just as the Federal Reserve begins one of its most aggressive rate tightening cycles in history.
It is inescapable that the US dollar must go significantly higher, while there is the emperor in place, but once the clothes are seen lacking, down it will come. This could be one of the greatest market roller-coaster opportunities of any market of all time.
US dollar rises; EURUSD target remains 0.9700
For now, the US dollar is going higher.
This means an ongoing decline in the Australian dollar. Also added to by a slowing domestic economy, high inflation, and late incorrectly large rate hikes from the RBA. Expect 65 cents this year, as forecast at the end of 2021, and still with a risk of 58 cents in 2023.
The Euro will continue to decline on the back of the risk of actual blackouts or reduced energy supply later this year. As the USA now struggles to maintain LNG supplies to make up for only one-third of the Russian supply in the best case.
Europe has charted an energy crisis path for itself and there is probably no way back.
My EURUSD target remains 0.9700 this year. Possibly even lower in 2023 toward .9200.
As these trends exhaust themselves in 2023 however, we may see the last all-time high for the US dollar before it turns to more accurately track the fall back of the US empire to be simply an equal of Europe and China.
The internal economics of the US may become even more challenging than for either of the other two superpowers in the coming years.
Continue to protect your equity portfolios. Still like Gold and Oil despite near-term volatility.
Food and energy prices will continue to march higher well into 2023. Severely crimping global economic activity.
When the Fed finally stops hiking rates sometime next year, this will likely correspond with that big picture US dollar top we will be hunting for.
Market insights and analysis from Clifford Bennett, Chief Economist at ACY Securities
