DXY has a juicy double bottom and is threatening to break out.
AUD is under pressure.
CNY too.
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Oil and gold are becalmed.
The rising DXY is pressuring metals.
Big miners ouch!
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EM is OK but will struggle if DXY rises.
Junk is sending out a warning.
Yields are still threatening to back up.
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Stocks approach ATH.
The one thing that nobody is positioned for is threatening to happen: a rising DXY.
The drivers of it are:
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- a less hawkish Fed;
- liquidity shortage and the looming end to the government shutdown;
- rumbling in junk debt markets;
- asset outperformance;
- a less bearish outlook for oil as Russian sanctions bite.
It’s not the stuff of a runaway rally because:
- a less hawkish Fed means a more dovish Trump;
- liquidity flood and a return to deep deficits;
- rumblings in junk debt markets are as much about a surge in hyperscaler supply as they are bad debt;
- asset outperformance is very narrow, and
- Russian sanctions may well fail.
But, for now, it’s enough to get DXY off the bottom and pressure commodity prices.
