Week of April 28, 2025

Looking at the upcoming week, I think it's interesting to note that we have the employment numbers coming out of the United States, and I think that will end up being a bigger deal than most people expect. After all, we have seen the declaration that the United States is going to collapse, the US dollar is going to lose the world's reserve currency status, and generally nothing but chaos is coming.

As I have traded for almost 20 years, one thing that I do know is that every time things get this tilted in one direction, you are getting close to the end. I remember a few years back when supermodels would refuse to be paid in US dollars and choose to be paid in euros. That was right around the time when the euro was trading at 1.58 to the US dollar, a level that has not been seen since. The COVID-19 situation was very similar, because the world was about to end, but the next thing you know, the stock market shot straight up in the air. In other words, when everybody thinks the same thing, you need to start looking in the other direction. I think this is the situation with the US dollar at the moment.

Many Reasons for the USD to Bounce.

There are plenty of reasons for the US dollar to bounce, starting with the fact that it is oversold. However, there are other fundamental reasons why the US dollar needs to go higher over the longer term, not the least of which will be the fact that everybody in the world is in massive debt. Unfortunately for most international debts, they typically are based in US dollars. This is an oversimplification of the entire situation, but sooner or later, people need US dollars to pay back bonds, government loans, etc.

Employment Numbers on Friday.

On Friday, at 12:30 PM GMT, the Bureau of Labor Statistics will release the latest employment figures in the United States. Average Hourly Earnings month over month are expected to be 0.3%, while the Non-Farm Employment Change number is expected to be 129,000 jobs added for the month of March. Finally, the Unemployment Rate is expected to come in at 4.2%, according to most experts.

The question that we need to ask is whether or not the employment numbers come out better than expected. If they do, that puts more pressure on the Federal Reserve to keep interest rates higher than most of the rest of the world. If that's the case, this could lead to yet another reason why the US dollar might bounce. Interest rate differential does matter over the longer term, but in the short term you can see things the couple like they have over the last couple of weeks.

Technicals All Look the Same.

The technical analysis for the US dollar shows a situation where it's ready to bounce against most things. You can say this against gold, the Swiss franc, the euro, the British pound, the Australian dollar, the Canadian dollar, and the Japanese yen. When you look at the weekly chart, you can see exhaustion candles working against the US dollar, and therefore I do think you are going to see a bit of a recovery for the greenback. Those who don't show exhaustion candles, are showing actual positive candles in favor of the greenback.

The reason this matters is that, as a general rule, if you get the US dollar right, you get the markets right overall. All things being equal, I do expect the US dollar to recover this week, but whether or not it changes the trend will remain to be seen. There are some currencies that I prefer over others to short, but I think as an overall general attitude this week, the greenback looks like it is going to come roaring back, at least for the short term. Below are some charts that I am referencing:

Sometimes the market whispers, and sometimes it will scream.

Trade well,

Chris