Wow, the US Dollar (USD) has weakened quite significantly. Asian currencies, including the Rupiah, have kept strengthening over the past few weeks Asia is pushing back hard against Dollar pressure. This has also driven BTC and gold prices higher, as the US Dollar Index (DXY) sits near its lowest level in months, around $98.50 - $98.80. Let's break down why the forex and crypto sectors are in a bull run. Here are the main factors behind this month's rally in Bitcoin and Gold
- US fiscal concerns after government debt broke through $40 trillion.
- Weaker US economic data, including employment and prior inflation figures, which has reduced expectations of further Fed rate hikes.
- The US Treasury's plan to double its long term Treasury bond buyback program, which is pressuring yields and raising doubts about the dollar's credibility.
The dollar has weakened against most major currencies, boosting the EUR, GBP, AUD, NZD, and Asian currencies. This dollar weakness has also driven sharp gains in BTC/USD and XAU/USD. Toward the end of August, Fed Chair Kevin Warsh's debut speech on August 28 is the key event to watch. Markets are waiting for signals on interest rate policy, inflation, and Fed credibility any of which could trigger volatility in the USD and other currency pairs, including Bitcoin.
On the 1 week timeframe, USD is deep in the red against nearly every major pair EUR, GBP, JPY, CHF, AUD signaling that the DXY/USD is currently very bearish and weakening sharply against major currencies. In terms of trading strategy, an ideal setup would be looking for sell on rally opportunities on USD, or capitalizing on strong vs weak momentum by going long on the currencies showing the most dominant strength, such as CHF -1.61% or AUD -1.57%.
A summary of US macroeconomic data shows a mixed to dovish picture GDP growth stable at 2.1%, unemployment holding at 4.1%, but inflation still running fairly high at 3.4%, alongside a trade deficit and a heavy debt to GDP ratio of 123.3%. For fundamental traders, an interest rate of 3.75% combined with this moderate economic outlook signals that room for further rate hikes is very limited whether that means a hawkish pause or a dovish shift which explains why market appetite for USD has been weakening during this period.
Gold has just touched a new high at $4,632, right at the FVG zone between $4,642 - $4,595. Will gold push on to test resistance around $5,000? Or will it stall at the current FVG zone?
Bitcoin, meanwhile, has faced heavy buying pressure for three straight days and has broken through the resistance zone at $74,265 - $73,105. For now, the question is whether we'll see a temporary pullback or rejection until August 28, as markets wait for clarity from the Fed or whether BTC will push to new highs after any dip.
The dollar is struggling around 98.80 amid concerns over US debt and the Treasury buyback plan, pushing Gold toward the $4,600s with sights on $5,000, and Bitcoin above $74,265 heading toward the $77,000 range though a short term correction remains a real risk. All eyes are now on Fed Chair Kevin Warsh's speech on August 28 as the next likely trigger for volatility.
This article is original content by me, with some data sourced from Fxstreet-A and Fxstreet-B
⛔Disclaimer - This analysis is for educational purposes and reflects personal opinion only, not financial advice. Always practice risk management and use stop losses (SL) according to your own risk tolerance.
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