1. The U.S. dollar has no choice but to fall, and the RMB has risen. Has the U.S. dollar's "money harvest" completely failed?
The U.S. dollar, as the world currency, has brought huge wealth to the United States; The reason why the Federal Reserve dares to turn on the printing press to print dollars frantically is because the U.S. dollar is the world currency. The Federal Reserve can use the U.S. dollar to raise interest rates , to cut interest rates and quantitative easing and other measures to collect the wool of the world.
The U.S. dollar is the world's currency. In order to obtain U.S. dollars, countries must sell the products of their hard work to the United States. Americans pay in U.S. dollars to obtain goods from various countries. But it is really easy for the United States to obtain U.S. dollars. As long as Congress raises the debt ceiling , the Federal Reserve can print U.S. dollars, and the U.S. Treasury Department will sign and get the U.S. dollars.
Everyone knows that since the birth of banknotes, depreciation has been absolute, while appreciation is only relative. (The so-called appreciation is a question of how much or how little each banknote has depreciated.) If countries around the world other than the United States hold 100 trillion U.S. dollars, and the U.S. dollar depreciates by 10%, then the United States will get 10 trillion.
Therefore, Although the U.S. national debt exceeds 31.4 trillion, the U.S. Treasury Department is not worried at all, because as long as the U.S. dollar remains the world currency and countries still hold U.S. dollars, then global wealth can be looted through U.S. dollars. What the Treasury Department has to do is to balance the accounts using reasonable and legal methods. For them, the U.S. dollar is just a numbers game.
The United States wants to plunder global wealth through the US dollar. The key is that all countries around the world recognize the status of the US dollar as the world currency and hold US dollars, US bonds, etc.; The Federal Reserve raises interest rates on the US dollar. In fact, an important role is to allow investors around the world to hold US dollars on a large scale and exchange them for US dollars with other currencies.
The principle is very simple. The Fed's one-year interest rate is 4.25--4.5%. Taking the Japanese yen as an example, the Japanese yen's interest rate range is plus or minus 0.5%. In this case, if you convert Japanese yen into U.S. dollars and deposit them in the bank, you can get the high interest rate of U.S. dollars without doing anything. This is also the fundamental reason why the U.S. dollar index has risen after the U.S. dollar's substantial interest rate hike.
However, after the U.S. dollar raised interest rates in September 2022 and soared to 114.8, it began to turn downward, while major global currencies such as the RMB, euro, and Japanese yen rose sharply against the U.S. dollar, and the subsequent U.S. dollar interest rate hikes did not reverse the trend of no decline. Is the strong U.S. dollar over? Has the U.S. dollar’s attempt to collect the world’s wool completely failed?
The U.S. dollar index fell from a high of 114.8 to 104.3, a drop of nearly 10%. This range is undoubtedly very large in the exchange rate market. To understand whether the strong U.S. dollar is over, must understand the reasons for the decline of the U.S. dollar index.
When a country's currency appreciates, the general logic is that the country's economy is very strong, but the strength of the U.S. dollar index is not the U.S. economy good. On the contrary, the U.S. economy is very bad, with hyperinflation (CPI data has reached a maximum of 9.1% in 40 years); the strong dollar is entirely caused by the Federal Reserve's interest rate hikes .
As the huge U.S. national debt has risen crazily to 31.4 trillion U.S. dollars, the U.S. government is completely unable to repay it (the U.S. fiscal deficit is 2.8 trillion U.S. dollars in 2021), has to issue new debt to repay old debts and use debt to support debts; Moreover, the U.S. dollar’s crazy interest rate hikes have also caused the World Bank to predict that the U.S. economy will be in recession in 2023; This is the fundamental reason why the U.S. dollar index has no choice but to turn downwards when the Federal Reserve is still in the interest rate hike cycle. Therefore, the strong U.S. dollar is undoubtedly over.
If the U.S. dollar index continues to fall, which means that the U.S. dollar continues to depreciate, it will undoubtedly seriously damage the credibility of the U.S. dollar as a world currency. Investors around the world will undoubtedly sell the U.S. dollar, and the status of the U.S. dollar as a world currency will end.
The U.S. dollar turns around and falls, and global arbitrage funds are unprofitable. They will naturally sell U.S. dollars, because buying U.S. dollars and depositing them in banks can earn high interest rates on U.S. dollars. However, if the U.S. dollar continues to fall, when the income from high interest rates is less than the depreciation of the U.S. dollar exchange rate, global investors will naturally abandon the U.S. dollar. This is the so-called market law.
Therefore, when the U.S. dollar continues to fall, it will naturally cause investors around the world who hold U.S. dollars to sell U.S. dollars significantly. When countries around the world do not hold U.S. dollars, the U.S. dollar will not be able to gain global wool. If this happens, the over-issuance of U.S. dollars will inevitably backfire on the United States itself, and the U.S. economy will inevitably collapse.
Of course, the U.S. dollar index fell from 114.8 to the 104.4 area, which is not yet a U.S. dollar crisis . Global investors still hold a large number of U.S. dollars and U.S. bonds, which means that the United States can still use the U.S. dollar to plunder the world's wool! It wasn't a complete failure, it was just that there were fewer harvests.
If the US dollar index falls below 86, then it can be said that the US dollar crisis is imminent. This is an important technical support level; If the US dollar index falls below 78, then it can be said that the US dollar trend is over. The US dollar will lose its status as the world's currency.
Although there is no imminent crisis for the U.S. dollar, due to the poor inflation in the United States (CPI was as high as 7.1 in November), huge national debt, and expectations of economic recession, central banks of various countries have begun to sell the U.S. dollar in a trend, including U.S. allies Japan, Australia, the United Kingdom, Canada, and other countries.
The rise of the RMB is related to the sharp decline in the US dollar index, but the general trend of the RMB against the US dollar is rising. This is because the Chinese economy is the driving force for global economic growth , and its contribution to global economic growth exceeds that of the G7 countries (the United States, Japan, Germany, France, the United Kingdom, Italy and Canada) combined; The long-term appreciation of the RMB against the US dollar is essentially the result of the sustained and steady growth of the Chinese economy!
2. U.S. dollar index, Dow Jones index , Nasdaq index trend analysis
The trend of the U.S. dollar index belongs to the high-level decline and shock stage , After rising to 114.8, it fluctuated and fell, and the U.S. dollar index fell to the 104.18 area and fluctuated; the U.S. CPI data in November was still as high as 7.1%; after the Federal Reserve raised interest rates 7 times, there is a high chance that the U.S. economy will enter a recession. Even if the U.S. dollar continues to raise interest rates, the U.S. dollar index will continue to fluctuate and fall, but will not rise.
The Dow Jones Index fluctuated, the Nasdaq Index, the S&P 500 Index rose slightly simultaneously; the minor trend was a shock and decline ; the major trend fell and the relay did not change.
US stock leading Tesla , Apple fell slightly simultaneously, Amazon rose slightly; the trend of the three leading stocks is weaker than the US stock broader market index, which means that the market continues to fluctuate and fall, and the certainty is very high.
3. Shanghai Composite Index , GEM Index trend analysis, Beishang Capital Data
A shares GEM index, Shanghai Composite Index, Shenzhen Stock Exchange Component Index and Science and Technology Innovation Board index, trends are all small shock downward trends, shock adjustment stage, daily line is in the market change stage ; northbound funds are closed due to Hong Kong stocks , there is no data.
The Shanghai Composite Index fell slightly, while the Shenzhen Component Index, GEM and the Science and Technology Innovation Board rose simultaneously, trading volume increased moderately; that is, the four major indexes fell from a shock, and there is a high chance that the market will change to a shock and rise.
New energy vehicles leader Ningde era , BYD have risen simultaneously, and there is a high chance that the volatile and falling market will end; Insurance, banks, securities firms have small synchronous shocks, and the large financial sector is weak, which is also an important reason for the decline of the Shanghai Composite Index!
4. Summary of Wenqutang stock market trading experience
The market was born in despair and rose in hesitation! Moreover, the market is rarely straight, and often fluctuates. It is easy for people to lose the direction of the market. It is important to see the direction of the market clearly!
Excellent investors are always waiting, always patient, waiting for the market to confirm their judgment. Remember, don’t completely trust your judgment until the trend of the market itself confirms your opinion!
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