Transcription
[music and bell] Hey folks, welcome to verifiedinvesting.com. My name is Gareth Soloway, chief market strategist here.
Now, in today's video, we're going to deep dive into the dollar, which looks like it might be getting ready to have a major breakdown on the charts below major support. We're also seeing the British pound, the euro, and even the Canadian dollar look to be surging to the upside in response. Is this the beginning of major dollarization or at least a quickening of it? We're going to explore and find out.
Let's dive right in, folks, and take a look. This is the US dollar, and you can see over the last five days, it has fallen tremendously. Now, for a currency, this is a massive move going from 99 a half on the DXY, which is the dollar versus a basket of currencies, all the way to close at 9750. So, a $2 drop in five trading days. Historically, that is very, very rare to see. And again, the bigger issue comes in when we start looking at potential trend lines, right? So, let's do that right now.
And this is the biggest issue I have right here is that if you go to the weekly chart and you go back to these lows, right, these lows in 2008 and 2011 and we connect those and we bring them through here. This now gives us essentially a range on the dollar, right, in terms of support. But the problem is we're already starting to get towards a potential breakdown in this zone, right? And that again, my friends, is scary. Not only is this a massive red weekly candle right here, but again, it's getting close to hitting this support level. Now, going back to 2008 from number one, two, three, four, five, this would be the sixth hit. Now, in technical analysis, one thing we know is when you have a trend line, all right, and you continue to hit it, the more you hit it, the weaker it becomes until eventually you break down. At least that's what probability signals via technical analysis.
Now, having said that, we also have a little bit of a range right up here that the dollar has been holding. And this is amazing because it really goes back quite a ways. You could make a case that it goes all the way back in here, right? Where we put this through and you can see all of this technical was support, right? Support, support, breaks, tries to get back above, fails, hits, fails, hits again, fails, and then is starting to attack or get close to attacking this downward move.
Now, the reason why this is important, folks, is that this starts to bring us to the forefront of what's going on in the markets right now. You have threats of tariffs. You have I mean literally we just got through these these tariffs on eight European nations or at least the threat of them over Greenland. And now this weekend the president's threatening if Canada basically does this trade deal with China that he's going to impose 100% tariffs on Canada. And so this is essentially breaking the fabric of trust of the United States by other players, even our allies. And that again is going to make dollarization speed up. It just is what it is. You have other countries, even allies, that are now saying, "Wait, we can't be so reliant on the US dollar and have them be able to impose these crazy or threats of these tariffs on us because we're doing a trade deal here or we don't want to do that there." And that, my friends, again, is going to speed up dollarization.
Now, is that good for gold long-term? Is it good for silver? Yes. Yes. Is it good for Bitcoin? Possibly. Most likely. I think so, at least. Um but again for those of us holding a lot of lot of dollars that is not a good thing.
Now this is the last kicker on this chart. Then we'll get into some other charts. So what we have here is a very standardized kind of support area on the dollar and resistance. And granted we have not broken down yet. I repeat we have not broken down but the other concerning factor that favors the downside is this move down. Okay. And then look at this pattern here. What kind of pattern is this? All right, so again, you have a downward move on a chart and then you start going like sideways to up. That's what we call an inverse bear flag. Bear being the key term there because this pattern tends to remedy itself with a further move lower. What that insinuates is that you're getting squeezed between so resistance and support, but eventually the remedy is a breakdown. And if you break down below this zone here, below this zone, which basically is around 95 on the DXY, you're likely going to speed the downward move on the dollar substantially, bringing the dollar down. First major support will be around 89 or just below on the DXY.
Now, if we turn our attention to other issues here, I mean, so what else would be kind of alluding to the fact that the trust in the US financial system is weakening significantly. And by the way, it's not just the tariff threats, it's the debt, too. All right, we came into an administration, right, where it was all about Doge and cutting spending and getting spending under control. And if you look at the data now, we're spending more money than we have ever spent before as a government, right? And so the debt is an issue, the threats are an issue because it's eroding that trust and that willingness to buy our treasuries, our debt, as well as hold US dollars and buy US dollars.
But we're seeing this also playing out in the 10-year yield. So, let's jump into that chart and take a look. The 10-year yield just broke out to the other side. And so, what we had here, and I've gone over this chart, if you've been watching my trading game plans, um, Monday through Friday at 9:00 a.m., we've gone over this, but you can see the pattern, right? It's an up move, bullish consolidation, and then we broke out, and now we're making another bullish pattern, which generally means we're going to remedy to the upside here. That means higher 10-year yields. In spite of the Fed trying to cut rates, the 10-year yield is telling us it is going higher. Why? Again, why? Let's think about this logically. the 10-year yield is going higher because as countries kind of get alienated and don't want to support or or basically have as much reliance on the US, they're selling US treasuries, which is a supply factor, which means yields have to go up to attract new buyers, aka the 10-year breaking out, and also new debt being issued. Buyers are saying, "Hey, listen. You have this much debt. We're not going to buy your debt because we don't think we're going to get paid back. So, we're going to demand a higher interest rate to compensate for that additional risk of maybe not getting paid back or maybe diluting the dollar by printing, printing, printing."
This is all encompassing, folks. This is a web that is getting bigger and bigger and it is ultimately going to eat away at the dollar's dominance as a reserve currency. Uh, which again will then have economic implications on the US that'll last 10, 20, 30 years beyond here.
All right. So let's go to the EuroUSD. Take a look at this. This is all you need to see. So the Euro, you can see very clearly here trend line downs sloping. We've broken out and look and even now, right? So you had a breakout, you consolidated, retraced to the scene of the crime, went up. Now what kind of pattern is this? It's a bull flag, right? In spirit of bull flag, the euro is setting up to go higher. This is a long-term breakout against the dollar going back to the financial crisis, right?
Just like the lows on the DXY showed us, the British pound, same chart, major trend line right here to high here. Here it broke out, retraced, broke out more, retraced again, and it keeps holding. And now look, it's starting to head higher. It couldn't break below this trend line. All right, tried multiple times. One, two, three, right? Maybe even four there. You can see a one hit, two hit. And now path of least resistance is to the upside.
Then we look at the Canadian dollar. Now, this is an interesting one, guys, because look at this. You have a trend line here, which is an absolute great trend line, right? Right through here and through here, right? In fact, I actually like this one even better. And I'll tell you why. High pivot one, two, three, high pivot. And it's getting ready to break out. Now, why do I say this is going to break out? Well, the pattern here on the Canadian dollar, what type of pattern is this? If you know your patterns, you know what I'm talking about here. If you don't, I'll explain it. This is what we call an inverse head and shoulders. Inverse head and shoulders are bullish patterns. They're very, very powerful when they break the neckline. Now, this hasn't broken the neckline yet, but the pattern is absolutely recognizable here, which shades the probability to a breakout on the Canadian dollar against the the dollar, right? And basically what you're looking for is you break this and off to the races it goes. And believe it or not, you can do a measurement on this. You want to know a target of the head and shoulders to completion. You take the low of the head to the neckline and then you map that out. And this would be telling us the Canadian dollar is headed to about 80 80 cents uh versus the US dollar right there. I mean really incredible, right? Um in any case, that's that's a great pattern setup that every investor should have.
Now, the one currency that is not performing, although it did have a great day in the last day is this one right here, the Japanese JPYUSD. Right now, again, you might say, well, why why is the Japanese currency been so weak against the dollar? All right, there's a lot of factors here, but you can see, I mean, look, it's it's at the lows. Now granted, the dollar fell a lot on this past Friday, so it's having a big up day or it had a big up day there. But the kicker is this, and this is what I go back to, is that globally buyers of debt are starting to shy away. Okay? They're saying they're actually actually balance sheets matter. I know, shocking, right? Like, oh my goodness, wait a balance sheet actually could matter. The answer is yes. Why? Well, Japan has massive debt to GDP, 240% debt to GDP. The US is also pretty high, 130% debt to GDP. These are unsustainable levels. All right? And so ultimately buyers of debt, right? If you're a pension fund, if you're a government out there, you're starting to say, "Wait a minute, this can't go on forever." which is what we've been saying here at verified investing for a long period of time is that debt levels you have to look at it and say listen certain periods it's not going to matter but it will eventually matter and the seeds the breadcrumbs are being laid here that it is starting to matter and there's going to be a price and it's going to be a bad price to pay for all that has been going on with debt and with your the erosion of the US dollar in terms of the confidence globally And what I mean by that is ultimately, folks, an eventual massive collapse. Timing is the hardest thing. I'm not going to be able to tell you is it a year, five years, 10 years out, but there will be another great depression and you got to be ready for it.
Now, how do you prepare? Well, gold, obviously, all the gold's rallied, but basically for me, pulls back significantly on silver, gold, platinum, platium. I'll be buying some of that. I'll also be doing other things to kind of diversify away. smart defensive plays in the market in my opinion are good. You know, at least in the near term, right? I mean, when everything goes to hell in a hand basket, it's not going to matter. But at least in the near- term, high dividend payers, uh, where again, their PE ratios are sub10, those are where I'm focusing like like staples. Staples. People are still going to buy pasta. I actually like the grains down here as a defensive play. Corn, wheat, these things are low on the charts historically. All right. in recessions and depressions, people still have to eat. They just can't buy the fancy, you know what, like filet mignon, so they go to cheaper alternatives. So again, Staples, those are the types you want to look at. Kagra brands, um, Craft Heights pays a great dividend. At least that's how I'm protecting myself.
Now, listen, I'm a swing trader, so I'm in and out of a lot of different things, but you got to be aware of what's coming and start prepping. Again, timing anyone's guess. All right? Timing is the hardest thing in the world, even for myself. But it is coming. You heard it here, folks, at Verified Investing. Have a great rest of your day. I'll talk to you soon. Take care.