I don't mean technical in terms of this indicator or that indicator. There's an issue in the market that needs to be resolved before the fundamentals can come back into play.
In this case it appears that a lot of dollars were borrowed (nearly for free) and used in say emerging markets (which would require selling dollars to convert to local currency). As the dollar gets stronger fx losses occur on whatever the money was used for. So the investment needs to be closed and dollars bought to return the free money.
Stronger the dollar gets the more this happens and you end up with what we have here where it essentially becomes a squeeze. So no matter what the fundamentals are saying, it's a technical move. And will continue till the issue is resolved, then the fundamentals will come back hard and fast.
We had exactly the same thing in 2008. That's why when we expect the dollar to be under pressure it isn't. And this is looking a hell of a lot like 2008, but with about 7 times more debt if I remember correctly.
I don't really know what the exact mechanism is. It doesn't matter. It's a bit like driving a modern Merc. I know there's internal combustion at work, but I don't know what all the other stuff bolted onto the engine does. Nor do I need to know. I just need to handle the things that keeps it going, like put juice when its empty.
My point is fx will do what it wants to do for reasons that might not be apparent at first. Commen wisdom is you look at the fundamentals and then trade technically in that direction.
Well that doesn't work, becuase of technical moves like this, where the fundamentals are temporariliy inconsequencial.
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