Something Is Happening in the U.S. Dollar

Added: 2026-05-30

[00:00:10]The US dollar may be on the verge of a major breakout and the catalyst may be this traitor Hormuse crisis. Higher oil and food prices hit Europe, Japan, the UK and many emerging markets much harder than the US. If that energy shock starts weakening the euro, the yen, the pound, uh the dollar could become the relative winner. So the question is simple. Is this the moment the dollar finally breaks out as the rest of the world absorbs the pain of this uh new inflation shock? Let's take a dive and uh and look at this here. Now, I want to start off by putting the dollar on a weekly chart. And shockingly, through one of what I would argue one of the bigger crisis that we've had, um the dollar has been incredibly quiet. Uh on a weekly chart, it's been more or less glued to the 50-week moving average, no decisive breakout. I would argue it's even in the dead center of the trade range that was established over the last year. And so, uh, everyone is ignoring the dollar. Like, the dollar is not the problem. Everyone's focused on interest rates, which rightfully so, they've been moving, uh, the bond markets, and of course the stock market. But we find ourselves at an interesting moment uh, on the dollar. Uh, the dollar has, uh, broken above its 50-day moving average here after a consolidation for a month.

[00:01:43]uh and uh and it may just be breaking a key level around 99 and a half. It hasn't done so yet. I wanted to bring it all to your attention uh because we haven't seen the breakout yet. We're just watching whether this thing really starts rolling. Now, I want to really bring it home this way. This is the euro and the euro rejected along its Fibonacci zones back around 118 and a half back in April. Since then, it's been deteriorating and uh down and it's been one big topping formation and some technicians would love to cookie cutter a geometric shape like a head and shoulders topping formation on this euro. Bottom line is as I view this 116 level to being a critical line in the sand. We've held it for over a week. But with the fact that we're seeing the pound sterling weakening the uh we've seen uh the yen after an intervention weaken all the way back to its lows. we find our uh ourselves in a situation where uh where we could potentially see a currency move at a time when nobody is really paying attention to it. So let's think about this a little bit more.

[00:02:56]Right? So Europe is particularly vulnerable because uh it imports the vast majority of its oil and food uh and so it's a direct terms of trade shock to Europe uh on a relative basis. So if the straighter horm moves and by the way when we talk when we talk about the straighter horm moves uh you know right now um the the poly markets are only showing a 33% chance that the straight hormuz is back to normal by the end of June. Now, in a previous video, I talked about the potential stresses in oil, but I'm far more interested in, well, at some stage, all of the byproducts, food, and everything else that is imported by Europe may disproportionately hurt the Europe more than it will hurt the United States. So, rising oil and gas prices uh are like an external tax on the economy.

[00:03:52]And so will we see far more uh recessionary behavior in Europe than we do see in the US? And does that manifest on the charts? Um and so uh this is the puzzle to solve here on this now. Uh the 116 level is a technical level I want to everyone watch. But notice here the pound sterling also failed back in late April, rolled over and is starting to trade below its 50-day key here. None of them has actually technically broken down yet, but they're all at the edge of a cliff. And one of the big things I look at from an intermarket basis is how do all of the global asset prices intertwine and mix. So, usually in a riskoff impulse, you would see strong dollar uh impact across commodity prices reflected in interest rate movement and obviously at the end manifesting in equity prices. A lot of us want to skip that process. But to me, if the dollar starts misbehaving, it will be a very early clue that things are starting to deteriorate. And watch these levels like the pound sterling around 133. And look at the way the US dollar yen has made it all the way back to its highs. This was the last time when the bank of Japan intervened uh uh just a a month and a half ago uh on on that. And we have not seen for instance a yen carry trade unwind uh or anything else. And the question is well Japan also is in the same situation huge importer of energy and uh and a huge importer of food and so it's uh these countries are all particularly vulnerable in this period.

[00:05:35]Now what is also something that I think uh may be of an important consideration in the euro is the fact that the Esther markets which is the sulfur uh markets for Europe are right now baking in two ECB rate hikes u to fight inflation which is the main concern the ECB has.

[00:05:57]But when you have supply shock inflation that is where policy error is the greatest. Think back to uh when the ECB raised interest rates in 2011 to fight inflation when oil was going to 110 back then and it was end up being a huge policy error and within a half a year they were aggressively cutting into a euro crisis point here. I think that while we're concerned about a lot of things, I do believe the rest of the world is exponentially more vulnerable than the US. Even though the US is already showing cracks, you know, consumer confidence and all these other things, but I still think Europe is going to break first and it will manifest in this dollar move and that is the thing to watch. Will we have a breakout in this US dollar? Watch it closely. hasn't happened yet, but this is s I think a really important outlet that will really stir up the inner markets if it ever got underway. It's a 116 level also on the euro. All right, that's where we're going to wrap up uh today's session. Uh I'm about to jump on with my members today on or on every Thursday at Big Picture Trading on our where's the trade as we go deep into the commodity markets and look at commodity cycles. We're going to talk about what's happening in oil, whether this move is a buying opportunity and whether the situation hasn't in any way improved.

[00:07:20]But at the same time, we're going to go and talk about this weakness in gold and silver and the platinum and platium markets. We're going to touch on the weakness in the nack gas markets, whether or not all of these uh grain names are all buyon dips. Um as well as what which of the commodity stocks are are still screaming buys. We have fresh new highs in Alcoa and a and a number of these other uh resource names that are doing incredibly well. So, we're going to go dive deep into all of that and and uh discuss with members where those opportunities are. Nonetheless, uh that's where we'll wrap things up.

[00:07:55]Anyone wants to join that uh at Bigpicture Trading could click on the 14day free trial link in this chat or just visit bigpertrading.com.

[00:08:04]There's a big uh sign up for the free trial thing right on the homepage. And so we'll uh see you there. Or if you're watching these uh just on social media, uh we will be back on Monday with another video. Thanks everybody.