Developing A Dollar Bearish Strategy Using The Scientific Method
Zaktualizowano
Should I Short USD? Yes or No?
If yes, then how? If no, then why?
The question is simple, but the answer may be complicated.
Therefore, we will dive into the macroeconomics of the American economy, with consideration given the most significant factors influencing the value of USD.
> OBSERVATIONS
1) Since March 2020, USD appears to have lost approximately 13% of it's market value.
2) Since March 2020, USD supply increased by $9.1 Trillion (COVID stimulus).
datalab.usaspending.gov/federal-covid-funding/
3) Congress was recently asked to approve an additional $1.9 Trillion (COVID stimulus).
context-cdn.washingtonpost.com/notes/prod/default/documents/9a786b76-2457-41ab-8c6a-eb0ea22d1de1/note/8bcf9ac3-3240-4b3b-9a2c-459a43c85760.
> RESEARCH
Part A: Three major external factors contribute to the value of USD...
investopedia.com/articles/forex/09/factors-drive-american-dollar.asp
1) Supply and demand:
Exporting American products and services creates demand for USD, because foreign investors must exchange their currency for USD, in order to complete the transaction.
Note: decreased exports = decreased demand = decreased USD value
Note: decreased stock/bond issuance = decreased demand = decreased USD value
2) Sentiment and market psychology:
Rising unemployment weakens the economy, reduces income, and slows consumption. If the US economy appears weak, foreign investors may sell-off their US securities, in favor of exchanging back to their national currency.
Note: decreased employment = decreased consumption = decreased USD value
Note: negative sentiment = decreased foreign investment = decreased USD value
3) Technicals:
The release of government statistics (payroll data, GDP data, etc.) may help quantify whether the economy is strong or weak. Historical patterns generated by cyclical support/resistance levels and technical indicators also contribute to the movement of USD.
Gross domestic product (GDP) is the total value of all the finished goods and services produced (in this case, within American borders)
investopedia.com/ask/answers/070615/what-correlation-between-money-supply-and-gdp.asp
Note: decreased employment = decreased GDP = decreased USD value
Part B: Four major internal tools (utilized by the Fed) contribute to the value of USD...
federalreserve.gov/monetarypolicy/policytools.htm
1) Discount rate:
The interest rate reserve banks charge commercial banks for short-term loans.
2) Reserve requirements:
The portions of deposits that banks must hold in cash in vaults or on deposit.
3) Open market operations:
The buying and selling of U.S. government securities (T-bills, bonds, and notes).
4) Interest on Reserves:
The interest paid on excess reserves held at reserve banks.
> HYPOTHESIS
Shorting USD will be profitable because the Fed is increasing money supply.
Shorting USD will be profitable because the Fed is maintaining interest rates near zero.
Shorting USD will be profitable because the Fed is maintaining reserve requirements at zero.
Shorting USD will be profitable because the Fed is repurchasing government bonds on the open market.
> EXPERIMENT
Part A: Build a diversified dollar bearish portfolio.
Include dollar bearish securities and commodities (FXC, FXE, UDN, GLD, IAU, DBC, DBP)
Include International stock and emerging markets ETFs (open to all suggestions for this)
Include foreign currencies (GBP, CAD, AUD, CNY, CHF, KRW, JPY, EUR)
Include crypto currencies (BTC, ETH, LTC, and especially the DeFi sector)
> RESULTS
Pending... follow me for a monthly update to see if I get rekt, much love!
If yes, then how? If no, then why?
The question is simple, but the answer may be complicated.
Therefore, we will dive into the macroeconomics of the American economy, with consideration given the most significant factors influencing the value of USD.
> OBSERVATIONS
1) Since March 2020, USD appears to have lost approximately 13% of it's market value.
2) Since March 2020, USD supply increased by $9.1 Trillion (COVID stimulus).
datalab.usaspending.gov/federal-covid-funding/
3) Congress was recently asked to approve an additional $1.9 Trillion (COVID stimulus).
context-cdn.washingtonpost.com/notes/prod/default/documents/9a786b76-2457-41ab-8c6a-eb0ea22d1de1/note/8bcf9ac3-3240-4b3b-9a2c-459a43c85760.
> RESEARCH
Part A: Three major external factors contribute to the value of USD...
investopedia.com/articles/forex/09/factors-drive-american-dollar.asp
1) Supply and demand:
Exporting American products and services creates demand for USD, because foreign investors must exchange their currency for USD, in order to complete the transaction.
Note: decreased exports = decreased demand = decreased USD value
Note: decreased stock/bond issuance = decreased demand = decreased USD value
2) Sentiment and market psychology:
Rising unemployment weakens the economy, reduces income, and slows consumption. If the US economy appears weak, foreign investors may sell-off their US securities, in favor of exchanging back to their national currency.
Note: decreased employment = decreased consumption = decreased USD value
Note: negative sentiment = decreased foreign investment = decreased USD value
3) Technicals:
The release of government statistics (payroll data, GDP data, etc.) may help quantify whether the economy is strong or weak. Historical patterns generated by cyclical support/resistance levels and technical indicators also contribute to the movement of USD.
Gross domestic product (GDP) is the total value of all the finished goods and services produced (in this case, within American borders)
investopedia.com/ask/answers/070615/what-correlation-between-money-supply-and-gdp.asp
Note: decreased employment = decreased GDP = decreased USD value
Part B: Four major internal tools (utilized by the Fed) contribute to the value of USD...
federalreserve.gov/monetarypolicy/policytools.htm
1) Discount rate:
The interest rate reserve banks charge commercial banks for short-term loans.
2) Reserve requirements:
The portions of deposits that banks must hold in cash in vaults or on deposit.
3) Open market operations:
The buying and selling of U.S. government securities (T-bills, bonds, and notes).
4) Interest on Reserves:
The interest paid on excess reserves held at reserve banks.
> HYPOTHESIS
Shorting USD will be profitable because the Fed is increasing money supply.
Shorting USD will be profitable because the Fed is maintaining interest rates near zero.
Shorting USD will be profitable because the Fed is maintaining reserve requirements at zero.
Shorting USD will be profitable because the Fed is repurchasing government bonds on the open market.
> EXPERIMENT
Part A: Build a diversified dollar bearish portfolio.
Include dollar bearish securities and commodities (FXC, FXE, UDN, GLD, IAU, DBC, DBP)
Include International stock and emerging markets ETFs (open to all suggestions for this)
Include foreign currencies (GBP, CAD, AUD, CNY, CHF, KRW, JPY, EUR)
Include crypto currencies (BTC, ETH, LTC, and especially the DeFi sector)
> RESULTS
Pending... follow me for a monthly update to see if I get rekt, much love!
Zlecenie aktywne
After 620 days of observing the market, I've activated my dollar bearish strategy. In anticipation of this move, I built a full-service bitcoin mining company where you can buy and host bitcoin miners in my renewably powered crypto data centers (visit delmarva.io for details). I truly look forward to publishing the results after this strategy is closed manually. Thank you again for the opportunity to learn and grow within the tradingview community... much love!
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