There’s a crucial situation setting up in the macro trading world right now, and it’s going to affect everything that’s priced in money… What I’m talking about is the U.S. dollar and the stock market.
Traders who use macro strategies try to profit by taking advantage of economic patterns like growth, inflation and the unemployment rate. Global macro traders will follow the economic environment on a regional, national and global scale.
Global macro traders analyze macroeconomics and geopolitical factors like currency exchange rates, status of international trade, political events and interest rates before executing trades.
These traders also know that the U.S. dollar is the central factor in macroeconomics, and that has a ripple effect on everything. Understanding the dollar is akin to knowing and understanding the market on a macro, big-picture level.
And something big is going on with the dollar this summer…
The U.S. Dollar and the Stock Market: Why Investors Are Cautious This Summer
We had an interesting move in the U.S. dollar this past week that is already playing out in different asset classes across the world right now.
Before Federal Reserve Chair Jerome Powell’s announcement on interest rates on June 16, the dollar was trading on the low end of $90.
After the Fed finally acknowledged there could be inflation in the markets… the dollar did something nasty to traders.
The dollar went up about 2% in the U.S. Dollar Index (DXY) This might not sound like a lot to some, but in the foreign exchange (forex) market, this is a massive move.
Don’t believe me?
The DXY measures the value of the dollar against a basket of foreign currencies: the Euro (EUR), Japanese yen (JPY), Canadian dollar (CAD), British pound (GBP), Swedish krona (SEK) and Swiss franc (CHF).
DXY will go up when the dollar is considered strong compared to the other six currencies.
If you remember this past year in 2020, when COVID-19 hit, the dollar went from trading around $95 to more than $102.
That’s about a 7% move and a huge payday for a few lucky forex traders.
However, do you remember what also happened this past March when the U.S. dollar made that 7% move to the upside?
Stocks collapsed 30%.
And now I see another 4% to 6% move to the upside for the dollar…
Do you have any idea what this could mean for commodities, international companies (like Apple), emerging markets and Bitcoin?
They’re going to crash.
Check out our short video below to learn more about the U.S. dollar and its effect on the stock market this summer. Be sure to share your thoughts in the comments section below.
And as always, send any trading questions to firstname.lastname@example.org and stay ahead of the markets, especially these choppy ones, by subscribing to our YouTube channel.
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