The Dollar Falls Below Support – Trustnodes

The Dollar Falls Below Support


Dollar strength index, Nov 2020

The dollar strength index has fallen below the iron support line of 92 for the first time in more than two years.

It dropped to 91.8 before slightly recovering as the world reserve currency significantly weakened this year.

Expectations are it will drop further following the appointment of Janet Yellen as Treasury Secretary, an advocate for more fiscal spending.

Trillions are expected to be spent by the new President-Elect Joe Biden, including some $2 trillion on climate change.

In addition unemployment is expected to go up due to the biggest contraction in a century.

That may necessitate more government borrowing which currently translates to printing as the Federal Reserve Banks effectively lend to the government by just printing the funds.

Hence the dollar has weakened with stocks reaching all time high. While bitcoin was close to overtaking $20,000, but a correction brought it down to $17,000 before it could do so.

“The trend has shifted to favour risk assets. Yellen will team up with the Fed and support the economy. U.S. rates will remain low for a long time,” said Junichi Ishikawa, senior foreign exchange strategist at IG Securities in Tokyo.

That suggests there’s more to go for bitcoin which is now seen as a hedge against mass devaluation with it gaining against the dollar for much of the year.

If the dollar continues to fall it might find support at 88, a level it briefly stood at in 2018.

Alternatively it could well go to 80, where it stood in 2014 following the quantitative easing in 2008.

In either case bitcoin is expected to gain, with it potentially even surpassing all time high if this devaluation continues.

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