Why I’m Betting Against the Bulls in This Major Currency

[Money Trends with Andy Krieger]( Welcome to Money Trends! If this is your first time reading one of our issues, learn more about us [here](. And if you have any questions or comments, shoot us a note anytime [here]( or at feedback@andykriegertrading.com. Why I’m Betting Against the Bulls in This Major Currency By Andy Krieger, Editor, Money Trends The extent to which the market is choosing to ignore the awful reality is astonishing. Since March, we have suffered almost as many Covid-19 deaths as all U.S. combat deaths in World War II. And yet the market keeps charging higher! Yes, we have vaccines on the way. But how many more people will die before the vaccines can be broadly distributed? Plus, we also have other factors at play that normally would create an environment of caution… We have a ballooning federal deficit and Fed balance sheet… sharply slowing growth in the fourth quarter… the expected flat to negative growth in the first quarter of 2021… and rising yields in the 10-year treasuries. All of these things are being swallowed up by the ebullient mood of investors, not even slowing the frenzied stock buying. Clearly, we have a bubble… but not only in the stock market. As you’ll see below, even the forex market is behaving erratically. But that doesn’t mean there aren’t opportunities to be had… In fact, today, I’ll tell you about one promising setup I’m betting on in the currencies. But first, some background… Recommended Link [The Name Of Jeff Brown’s #1 Private Biotech For 2021 Is…]( [image]( During his The Cure Event, Jeff Brown revealed the name of his #1 private biotech company. Within a matter of weeks, this biotech could IPO and make investors a small fortune. [Click here to learn the name for free (no purchase necessary)]( -- Setting the Stage for a Financial Catastrophe As I mentioned above, we have a financial bubble of epic proportions. If you aren’t concerned already, I think you will be once you see this chart… [image] It shows the Shiller price-to-earnings (P/E) ratio, which is a good way to measure market valuations. As you can see above, the current market is now more overvalued than the 1929 crash levels. It’s not yet as extreme as the whacky dot-com valuations of 2000, however, so I suppose we can sigh with relief. Now, you’re probably wondering… With how high valuations are today, does this mean the next market crash is right around the corner? Not necessarily. The psychology of investors is so overwhelmingly positive right now, that the bubble might persist for a while longer. Likewise, the Federal Reserve can persist with its lies and denials for a while longer, too. But over the long run, they are setting the stage for a financial catastrophe. What do I mean by lies and denials? Consider what Janet Yellen – Biden’s pick for treasury secretary – said in 2017, when she was still the Fed chair. She stated confidently that, due to the safeguards enacted in the wake of the 2008 financial crisis, we would not see another financial crisis in her lifetime. She is in quite good health, so it is clear that her prognosis was very wrong. After all, we are still climbing out of the pandemic-induced crisis. But that’s not all… Also in 2017, Yellen said the nation’s $20 trillion debt “should keep people awake at night.” Now she is pushing for ever-greater fiscal expenditures, as the financial crisis we are suffering from is causing such extreme pain to so many tens of millions of people. Perhaps she was kept awake at night because she knew that we would have to increase the deficit by over 310%. Whatever the reason, is this really the person we want overseeing our Federal Treasury Department? Between her and her Fed successor, Jerome Powell, we have quite the duo managing our country’s fiscal and monetary policy. Now, I am not suggesting Yellen and Powell are not very intelligent. But I am suggesting that they may have different agendas than we might like. For sure, our k-shaped recovery is tenuous, and the disparities in wealth in our country are moving to levels that are outright dangerous. These are issues I’ve covered at length in these pages, so we won’t delve deeper into them today. But what about the erratic action we’re seeing in the currency markets, as I mentioned earlier? An Asymmetrical Risk in the Market The currency market’s relentless “risk-on” (or bullish) mentality over the past few months has been perplexing, to say the least. The currencies are reaching levels of overbought and oversold like we’ve never seen before. As an example, the dollar/Swiss pair recently hit a level of 1 on a momentum scale. This is the most oversold condition I have seen in over 35 years. But what do I mean by that exactly? We use momentum to measure the likelihood of the market following through further in the same direction. Normally when dollar/Swiss gets below 20 on the momentum scale, it is ready for a snapback rally that persists for several weeks. Conversely, when the measure gets above 80, a sell-off usually follows. But things are different now. Measures stay below 10 and above 90 for weeks and weeks, but no correction follows. And we have similarly extreme conditions in almost every pair. That said, there are some setups we like right now. For example, we like the risk-reward of being short the pound against the Swiss franc. Here’s why… We believe there is an asymmetrical risk in the market. It could yield a quick 5% or 6% sell-off if the Brexit deal either blows up or is watered down enough. And the chances of that may be higher than the market expects… especially with France threatening to veto the deal if their access to UK waters for fishing isn’t assured. How strange that an annual cash flow of under a billion euros could derail a deal that involves almost a trillion euros worth of trade. But in today’s world, we should expect to see many strange things. At any rate, we believe the inevitable hard Brexit has not yet been priced in by the market. So we’re betting on additional downside in the British pound. Regards, Andy Krieger Editor, Money Trends --------------------------------------------------------------- Like what you’re reading? Send your thoughts to feedback@andykriegertrading.com. 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