Fundamental Analysis on USD 16 January 2023
Inflation report, benefits, forex, trading, trade

Author: Sifu Steve Tee

It is second week of January 2023 and things are not looking very well for the US economy. US is piling up on the national debt like there is no tomorrow and they are about to hit its debt ceiling mandate. At the moment, it is just a matter of widening the debt ceiling in Congress or suffer economical catastrophe. This is the consequences of decades of money printing, near zero level interest rates and cheap credit readily available to anyone. Despite employment data looking robust and persistent, the macro outlook for USD is rather bleak. Last week DXY tanked into 102 price level and bearishness seem to be on full swing. There could be more downside repricing as we move further into Q2 of 2023.

Over to the East, economist seem to be bullish on China’s economic outlook for 2023 as they begin to ease up on lockdowns and restrictions. It was forecasted that China will recover first during Q1 of 2023 and foster growth to the rest of the world. Consumer spending are also presumed to make a come back after several months of tight Covid-19 lockdowns that has very much weaken the Chinese economy. This is a good sign as China being the manufacturers of the world, it is also the growth drivers of the world. China’s relaxation on its strict lockdown mandate could not have been a better timing.

We all now know that central banks around the world are buying precious metals in record speed and quantity. Perhaps, central banks do know something big is brewing behind the scene which precious metals such as Gold and Silver, could play a pivotal role when the time comes. It was reported by BNN Bloomberg that “Global Debt Racing to 366% of Output Risks Next Crisis, S&P Warns” on 13 January 2023. Again, it all stems from years of cheap money and governments around the world are addicted to it, to keep their economies afloat. When debt (mostly dollar denominated) pile gets out of control, big money will seek to hedge their money into store value assets. Gold and silver are the arch nemesis of fiat currency (which in this case, USD as the world reserve currency). As the power of the East advances and form alliances amongst themselves, the de-dollarization wave is imminent and a new world reserve currency that is backed by commodities such as Gold may arise from the horizon to challenge America’s dollar hegemony.