FX FUNDAMENTAL ANALYSIS by Stewart Richardson
The End of the Dollar Standard
Will the Dollar standard remain in the years ahead? What would the new system look like, and what would happen to the global economy and markets?
We’ve all seen charts similar to chart 1, showing US bond yields, and the extraordinarily orderly decline in yields over the last 30 years or so. On the chart, we have marked the trend channel that has contained all price action for at least 25 years, and the red horizontal line illustrates some chart resistance at current levels. At the risk of stating the obvious, within the confines of a multi-decade trend
42 FX TRADER MAGAZINE April - June 2018
that has shaped the performance of all financial markets globally, we are near a tipping point that should be resolved within the next 9 months.
We have made the case recently that higher interest rates could easily impact global financial markets, and although equity markets are seemingly ignoring this as they melt up, there is a potential coming together of macro
factors that really could change the world as we know it.
Since the end of WWII and the signing of the Bretton Woods agreement, there has been one major change to the global financial system. Between 1944 and 1971, most currencies were fixed against the US Dollar, and with the Dollar convertible to gold at a fixed price of $35, there was a backstop
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