Will U.S. Dollar Uptrend Slow Foreign Real Estate Investment In The U.S.? (Technical Analysis)

Jul. 20, 2022 11:22 AM ETUUP, USDU, UDN, COPX, JJC, JJCTF, CPER, RDFN, DHI, CUT, WOOD1 Comment
Chris Vermeulen profile picture
Chris Vermeulen
2.26K Followers

Summary

  • International investors interested in buying U.S. real estate are having issues as converting their country’s currency into the USD significantly reduces the amount of real estate they can purchase.
  • Other housing-related commodity markets such as copper -38.09% and lumber -70.24% are also signaling a recession.
  • Depending on a trader’s age, they may not have the time to wait nor the patience for a market recovery. Successful traders know it’s critical to keep drawdowns with reason, as most have learned this principle the hard way.

Real estate agent and businessman customer

gremlin/E+ via Getty Images

The U.S. Dollar uptrend has been going on since January 6th, 2021:

  • U.S. Dollar is at a 14-year high
  • 2020-2022 U.S. Presidential Cycle: USD appreciated +18.33% to date
  • 2016-2020 U.S. Presidential Cycle: USD depreciated - 12.80%
  • 2012-2016 U.S. Presidential Cycle: USD appreciated +37.20%

International investors interested in buying U.S. real estate are having issues as converting their country's currency into the USD significantly reduces the amount of real estate they can purchase.

According to an article by Patrick Clark of Bloomberg on July 11, 2022, "Across the country, nearly 60,000 homes sales fell through according to an analysis by Redfin Corp." "That was equal to 15% of transactions that went into a contract that month, the highest share of cancellations since April 2020, when early Covid lockdowns froze the housing market."

Redfin (RDFN), which offers a full-service real estate brokerage discounted service, has suffered a staggering loss of -92.80% in its stock price after putting in its February 2021 high.

D. R. Horton (DHI), America's largest homebuilder as of January 20, 2022, responsible for 71,292 home closings totaling $21.5 billion in revenue for 2021, has dropped -46.44% from its high.

Other housing-related commodity markets such as copper -38.09% and lumber -70.24% are also signaling a recession.

U.S. Dollar +18.33%

  • UUP +18.33% U.S. Dollar ETF
  • FXC -3.14% Canadian Dollar ETF; Spread CAD to the USD 21.47%
  • FXA -10.73% Australian Dollar ETF; Spread AUD to the USD 29.06%
  • FXF -11.06% Swiss Franc ETF; Spread CHF to the USD 29.39%
  • FXB -12.33% British Pound ETF; Spread GBP to the USD 30.66%
  • FXE -18.42% Eurodollar ETF; Spread EUD to the USD 36.75%
  • FXY -25.86% Japanese Yen ETF; Spread JPY to the USD 44.18%

Invesco DB USD Index Bullish Fund ETF • UUP • ARCA • DAILY

UUP Invesco DB USD Bullish Fund ETF chart

Redfin -92.80%

  • February 2021 to present
  • -$91.84 per share or -92.80%
  • 68 weeks down; 476 days down

Redfin Corporation • RDFN • NASDAQ • WEEKLY

Redfin chart

D. R. Horton -46.44%

  • December 2021 to present
  • -$51.42 per share or -46.44%
  • 26 weeks down; 182 days down

D. R. Horton Inc. • DHI • NYSE • WEEKLY

DR Horton chart

Copper -38.09%

  • March 2022 to present
  • -$1.91 per pound or -38.09%
  • 18 weeks down; 126 days down

CFDs on Copper (US$/LB) • XCUUSD • OANDA • WEEKLY

CFDS on Copper chart

Lumber -70.24%

  • May 2021 to present
  • -$1218.50 per board foot or -70.24%
  • 57 weeks down; 399 days down

Random Length Lumber Futures (US$/Board Foot) • LBS1 • CME • WEEKLY

Random length lumber futures chart

In today's market environment, it's imperative to assess our trading plans, portfolio holdings, and cash reserves. As professional technical traders, we always follow the price. At first glance, this seems very straightforward and simple. But emotions can interfere with a trader's success when they buck the trend (price). Remember, our ego aside, protecting our hard-earned capital is essential to our survival and success.

Successfully managing our drawdowns ensures our trading success. The larger the loss, the more difficult it will be to make up. Consider the following:

  • A loss of 10% requires an 11% gain to recover.
  • A 50% loss requires a 100% gain to recover.
  • A 60% loss requires an even more daunting 150% gain to simply break even.

Recovery time also varies significantly depending upon the magnitude of the drawdown:

  • A 10% drawdown can typically be recovered in weeks to a few months.
  • A 50% drawdown may take many years to recover.

Depending on a trader's age, they may not have the time to wait nor the patience for a market recovery. Successful traders know it's critical to keep drawdowns with reason, as most have learned this principle the hard way.

Original Post

Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.

This article was written by

Chris Vermeulen profile picture
2.26K Followers
I am an internationally recognized market technical analyst and trader since 1997. My BAN (Best Asset Now) trading system beats the #SPX by 600%. Through www.TheTechnicalTraders.com/ my mission is to help clients boost their investment performance while reducing risk exposure and portfolio volatility. Through years of research, trading and helping thousands of individual traders and investors around the world I designed an automated algorithmic trading system indicators for the S&P 500 index which solves investor’s biggest problem related to the stock market - the ability to profit in both a rising and falling market. My focus is to educate individuals on how to swing-trade indexes, stocks, ETF's, precious metals, and energy.

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