Weierxin Daily Comment·׀United States dollar strongly affects financial stability
US dollar rubbing test top gold price test bottom rebound
August 30, 2022 Weierxin Investment Consulting Research Center
Chief Analyst Yang Yijun
A US dollar rubbing test determination Gold prices rebounded at the bottom.
. The international spot gold price opened at $1735.56 on Monday, with a high of $1745.42 and a low of $1720.00, closing at $1736.70, down $0.54, a drop of 0.03%. The -day K-line first declined and then rose the cross star.
USD index opened on Monday at 108.82 points, with a high of 109.48 points and a low of 108.47 points, closing at 108.76 points, down 70 points, a drop of 0.06%. The daily K-line hit a 20-year high and then fell sharply, showing a " Shooting Star " K-line pattern.
Before Powell's speech last Friday, the chance of federal funds rate futures hikes of 575 basis points in September was 46.5%, and Powell quickly climbed to 56.5% after his speech on stage at 22 o'clock.
Feder Chairman Powell's hawkish remarks only affected the late European trading and the US trading on Friday, and did not affect the Asian trading. Therefore, it is not surprising that Asian market sentiment relayed last Friday's US trading on Monday. We judged over the weekend that gold prices in Asia will bottom out at least in the short term after being suppressed on Monday.
Initial European market on Monday, starting at around 16 o'clock, market sentiment and trading quota began to reverse, the US dollar rose to the top and fell, and the gold price bottomed out at $1,720 and rebounded.
Observation from the initial European market gold price and the US dollar index, the gold market closely refers to the US dollar market, and the main force "does not show off the rabbit and do not show off the eagle": within two hours after the opening of the European market, the US dollar fell sharply, and the gold price was not willing to rebound.
20:30, as soon as the United States opened, gold prices accelerated to rebound, and at this time the US dollar had basically bottomed out during the day. Within two hours from 20:15 to 22:15 Beijing time, the gold price rose rapidly by nearly 20 US dollars, and the US dollar did not decline further. Therefore, we can understand the market quota during this period as ultra-short-term short-term . Judging from the period when gold prices rebounded, the dominant force should be the Wall Street in the early trading session of the United States.
Looking at the daily K-lines of gold prices last Friday and Monday, there seemed to be signs of their respective top and bottom:
After hitting another 20-year high to 109.48 points on Monday, the US dollar index fell sharply by nearly 1,000 points, and the final trading showed a "Shooting Star" K-line pattern of rising and falling back to . If we further observe the "hangneck" K-line combination last Friday, we will be able to "rub" K-line combination in two days. This combination is a manifestation of the very contradictory and fragile market mentality. The strengthening of long-short game is a signal that the market should be wary of turning points.
gold price is a solid long negative line on Friday. However, after the gold price first fell and then rose on Monday to form a cross-star K-line, the gold price pattern on Tuesday became more critical. If gold prices rebound for a long positive momentum on Tuesday, the K-line in the past three days will form a very standard " Hope Star " K-line combination, which is a signal that gold prices will bottom out in the short term or stage.
If the gold price performance is average on Tuesday, as long as it does not continue to fall sharply, even if the gold price rebounds for a long time on Wednesday, it can form a "compound hope star" K-line combination, with the same technical meaning as the stage or short-term.
further reviewed the sharp rise of the US dollar index on Friday and Monday, and the stimulus theme was Powell's "Eagle Song and Swallow Dance". The impact of this theme on the market is usually unsustainable, so gold prices are not without the possibility of "Hope Star".
B The strong US dollar affects US financial stability
For US regulators, the most hopes that the US dollar will hit the commodity market strongly to help inflation fall. The least I hope the US dollar will strongly impact the US financial markets such as , US stocks, , etc. in order to avoid impacting the market's confidence in the US economic and financial prospects.
However, the actual situation is just the opposite. The strong US dollar has a limited impact on the commodity and crude oil markets in the stage, and it can even be said to have no impact, but the impact on US stocks is immediate. When Powell's speech stimulated the dollar to jump last Friday, U.S. stocks quickly fell sharply. The close "negative correlation" between the US dollar index and the Dow Jones index in recent months also reveals the correlation operation logic between US stocks and the US dollar in the stage.For example, the daily K-line comparison chart of the US dollar index and the Dow Jones index:
From the comparison of the two K line chart , it is not difficult to see that the reverse operation is closely related. As long as the US dollar rises in the short term, the US stock market will seize the opportunity to rebound, creating space for the US stock market to decline in the later period for the US dollar to strengthen again. For example, in the AB range, the US dollar only consolidates at a high level, and the US stock market will seize the opportunity to rebound. Then in the BC segment, the US dollar ended its strong consolidation and ushered in a new round of upward trend, and US stocks fell in a trend. A few days after the US dollar index peaked, the US stock market has not yet escaped the "bear market psychology". The east wind against the weak US dollar showed a short-term short-term and finally tempted short. As the weakness of the US dollar continued, it rebounded strongly to the D position.
Then the US dollar stage turns stronger again, but the decline in US stocks has exceeded the negative guidance of the strong US dollar index. At this time, you must be careful that US stocks will fall too much and are tempting to short. Looking at the corresponding position of the US dollar index at 105.79 points, the breakthrough is not large compared to the previous band high of 105.01 points, but the decline of the Dow Jones Index is much stronger. Compared with the US dollar guidance, the Dow Jones Index has obviously too much room for decline.
is on the upward stage of the US dollar index 105.79-109.29, that is, the US dollar index has risen significantly in the weeks before the E point, but after the Dow Jones Index fell too much at the corresponding position of the US dollar index 105.79, it showed a significant anti-decline correction in the market. This period (the US index peaked at 109.29 points) can be understood as a short-selling stage in the US stock market.
EF stage, in the US dollar index pullback trend, the US stock market rebound after the short-selling stage was completed.
In the past two weeks, the strong US dollar index has accelerated the decline of US stocks. Especially recently, it seems that after the US dollar index peaked at a high of around 109 points (at least upward stalled), US stocks have not stopped the decline.
The author summarizes the prospects of the US economy and believes that the rebound of the US stock market is to "resist the fall" in the future. The systemic valuation of the US stock market is still significantly higher, and there will be a sharp decline in the next two years. The value of the US systemic participation is not very valuable. However, in the short term or stage, if the US dollar index effectively peaks or encounters obstacles around 109 points, US stocks may not have much room for continued decline.
observes the daily line of the US dollar index KD index . The prompt or warning of the peak of the US dollar index stage is still valid. In the figure, the KD index has confirmed that the top divergence of from the US dollar index several times relative to the US dollar index, and the US dollar index has peaked at the stage:
103.93 points to 105.01 points, the KD index has divergence from the K-line pattern of the US dollar index;
105.79 points to 109.29 points, the KD index has relative to the K-line pattern of the US dollar index;
105.79 points to 109.29 points, the KD index has relative to the K-line pattern of the US dollar index; The K-line pattern of the US dollar index is top divergence;
109.29 points to 109.48 points on Monday double top , the KD index continues to confirm the top divergence relative to the K-line pattern of the US dollar index;
Short-term observation, although the US dollar index may not necessarily turn and fall, it should at least be upward and stalled, and the short-term gold price may not continue to decline. In the
stage, if the US dollar index falls, first of all, we still need to observe the support of 60 daily moving average .
C Gold prices responded far from enough to the spread of currencies in Europe and the United States
Last week, the Federal Reserve released its currency stock report as of August 1. The latest U.S. M2 currency stock is US$21.6644 trillion, a slight decrease from the previous period of US$21.7048 trillion as of July 4. Compared with the same period last year, it increased by 5.52% year-on-year:
According to the historical report on the US M2 currency stock in decades, it is extremely difficult for M2 to have a negative year-on-year growth rate to occur. In other words, once the Fed's currency increment is released into the economic and financial sector, there is no absolute possibility of recycling, and it is not as easy to recycle as the loans released. How can these liquidities be recycled in other people's accounts according to economic and financial laws? Unless a financial crisis is created to eliminate liquidity represented by M2, how is it possible!
Therefore, according to the liquidity tightening cycle corresponding to M2, as long as the Fed's M2 increment "slows down", it is even controlled by the liquidity faucet. It is almost impossible to rely on negative growth in M2. Looking at the annual rate of US M2 currency stock in 60 years, there is no below zero, and the limit is that the period from 1992 to 1995 is approaching zero growth:
Therefore, the flood of liquidity caused by the increase in currency often has serious sequelae and a long period of time.
This round of rapid U.S. inflation began in April 2021. The growth rate of US M2 began to rise rapidly in mid-March 2020, when the epidemic spreads around the world. It can be seen from this that the impact of liquidity overflow on inflation may lag after one year or even more, and then "silently soaked", and inflation may last for N years!
Looking at this round of US M2 currency stock growth rate, it began to decline after peaking at 27.27% in January 2021, with the latest growth rate of 5.52%, which is at a normal level of roughly "low" for decades. This means that in the medium and long-term market future, the US M2 faucet has not much room for further reduction, which has nothing to do with where the US dollar interest rate is. Interest rates, currency stocks, debt scale, etc. are different factors that affect liquidity. Just focus on the interest rate trend and judge liquidity trends, you may make mistakes.
Observation of the ratio of US M2 to GDP from 1990 to the present for about 30 years, the United States is more superstitious about stimulating GDP through currency release. The ratio of
M2 to GDP continues to rise, indicating that the efficiency of monetary stimulus on economic output is declining. Especially after 2020, the ratio jumped, and the effectiveness of M2 stimulus on economic output can be said to have dropped to its limit.
We analyzed in the early stage that the driver of US debt to GDP is still the same.
is a deeper understanding. The massive release of US M2 and the massive government's debt may not be just "in-house consumption", but is committed to importing the world. In this way, the interests of holders of US dollar and US bonds have been greatly diluted, and the United States has achieved the purpose of using the hegemony of the US dollar to seize the interests of holders of global US dollar and US bonds. In the past two years, we and Russia have sold US debts in a large manner, and we have further built inflation protection berths to minimize the damage caused by the hegemony of the US dollar.
Since 2020, the unlimited US currency and fiscal means are despicable to the interests of global US dollar and US debt holders. Of course, the United States itself knows the despicableness of bottomless limited quantitative easing, so it is committed to defending the credit of the US dollar by mouth or other means, and curbing the credit of gold is also one of the means.
However, the containment of gold credit can only be temporarily and arrogant. The decision-makers of the global central bank see very clearly. In the past decade, the proportion of gold in global central banks' foreign exchange reserves has continued to grow, and the central banks of all have continued to increase their gold reserves. Therefore, the strategic and tactics of the United States and Wall Street to curb gold credit are supported by the bottom line of central banks in various countries' reserves.
, such as international spot gold prices, year-on-year growth rate of US M2 currency, and the actual gold price after excluding the changes in US M2 currency stock (adjusted to the 2011 high level absolutely consistent) Figure:
, position A during the 2000 financial crisis and position B during the 2008 financial crisis, all correspond to a round of liquidity easing with amplified M2 growth. However, compared with the C position liquidity stimulus scale that was hit by the epidemic in 2020, it is all "small". See the previous picture. The growth rate of US M2 currency after the C position has greatly crushed the highest record level in the previous 60 years.
However, looking at the gold price performance since then, although it seems that the nominal gold price of international spot prices has become stronger, compared with the A and B positions, the gold price performance after the C positions is undoubtedly the weakest. After excluding the impact of the US M2 changes, the latest actual gold price is only US$771.84, the lowest since 2006. It is far from enough to demonstrate the reaction of international spot gold prices compared to the flood of liquidity in Europe and the United States!
Looking at the A position after 2000 and B position after 2008, even if the US M2 enters a medium- and long-term decline, the international gold price will not change. Its common point is that inflation has been stubborn for many years. Therefore, we should be more patient with the current "indifferent" of international gold prices compared with the flood of liquidity.
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