To The Moon

The US Dollar Index's rebound is still continuing, and it has shown an accelerated upward trend in the past three weeks. Although the news of debt crisis and hopeless rate hike seems to be unfavorable to it, from the performance of the yen, the US dollar has a great opportunity to try to rebound from a weekly high.

The linkage between the US Dollar Index and USD/JPY began at the end of last year, when BOJ intervened because of excessive depreciation of JPY. After that, the speculation about the correction of the Bank of Japan's monetary policy after Kuroda's departure pushed the yen to rebound, and the United States and Japan once fell to around 127 (the highest was close to 152). At the same time, the US Dollar Index also obviously peaked and fell back, and maintained a downward trend. In January this year, the yen ended its rebound and began to weaken again.

Coincidentally, the low level of the first leg of the US dollar also appeared at the end of January, and then bottomed out twice in April, which has maintained a good rebound momentum at present. Although it is not completely synchronized in time, it still has a high degree of homogeneity in the overall rhythm and trend. This is especially true if the cycle is lengthened, although the impetus for most of last year came from the monetary policy of rate hike in the United States.

After the new president Kazuo Ueda took office, the expectation of further adjusting the Japanese bond yield target and tightening the policy does not seem to be as strong as before, which leads to the yen returning to the pressure mode. If there is no substantial change in this situation and there is no major turmoil in the financial market, it is difficult for the yen to find an opportunity to fight back.In the case of the yen downturn, the US Dollar Index has the opportunity to go further. With reference to the comparison of the weekly trend of the two, it seems that it is not difficult for the US index to measure the high point near 106.

In fact, since the beginning of this year, the voice of bearish on the US dollar has never stopped, and even some people think that the US dollar will end its historical position. But finding a stronger one than the U.S./U.S. dollar does not seem easy, both militarily and technologically. Based on this, in the worst case, the dollar will only fluctuate in its own cycle, and will not give up its hegemonic position.

Moreover, from past experience, once there is a crisis in the market, funds will often prefer US dollars/US bonds, and the rise of US dollars is also in line with the interests of the United States to harvest other countries. If you think like this, it is not difficult to draw the conclusion that the chances of rising the US dollar are no less than falling.

Of course, it is not easy to judge the long-term trend in the second half of the year. Whether it is recession or recovery needs data and time verification. If the economy really improves, the US dollar will naturally be temporarily abandoned by the market, and periodic depreciation is inevitable. But in the event of a recession or other trouble, the dollar will continue to serve as a safe haven and its value.

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