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FX - EuroTrash

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Here is my ‘SafeHaven.com’* article of the week ;)

On the third try, Germany finally conquered Europe. The EUD = the DM.

 

But instead of ‘pillaging’ as is the historical norm, guilt ridden socialist Germ,Inc. is being inundated with ‘reparation’ and welfare demands from the vanquished states that did not (could not?) keep their financial houses in order during the ‘war’. If Germ,Inc. does not at least partially accommodate these demands, then resistance to being a member of the new empire rise to unacceptable levels as the far edge states threaten to opt out…

 

Although the US is doing the very best it can, it is not a sure bet that it will win the ‘race to the bottom’…

I love to see the EUD soar! Gives a chance to short that trash again…

 

Thoughts?

 

 

(*poking fun at myself not SafeHaven.com)

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So buy Yuan? The dollar might pop in the medium term and I would hesitate to go so far as to say its doomed but it's not something I would want a longer term punt on.

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Today the ADP report for Jobs showed very low growth rate in USA

also manufacturing was reported to be low

 

does the USA jobs news have any co-relation with the GBP/USD and EUR/USD ?

 

any explanations ?

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Yesterday, German Chancellor Angela Merkel noted, "We don't have a euro problem in Europe. We have more of a debt problem. Financial markets doubt whether some EU states can manage their debt in the long-term." I have a third culprit for Europe's problems: economically ignorant and/or deceptive leaders.

 

The eurozone's debt is directly linked to the value of the euro. If Greece or any of the other PIIGS default, the euro will suffer as a whole.

 

Furthermore, Greece's problems and the bailouts are a direct result of the euro's existence. If Greece had its own currency, there would be no bailout from the European Union. Instead, the country would print a ton of its own currency. With inflation, Greece would likely monetize part of its debt. In the process, Greek citizens and bond holders would suffer the largest cost of the inflation. With the euro, Greece can't print its way out of debt - hence the rest of the European Union must bail them out. Instead of Greece suffering the most for its poor decisions, other countries must foot the bill. And in instead of Greece inflating its own currency, the burden is placed on the euro.

 

This isn't Greece's only connection to the euro. Since inflation is currently above the European Central Bank's target, the ECB must raise rates. However, if it raises rates, the cost of borrowing becomes more expensive across the board from Greece to Portugal. Due to its connection with the euro, the ECB must consider Greece when making a decision about German and French inflation. This is true for no other reason than the shared euro currency.

 

Of course, Merkel should know better. If her statements didn't come from ignorance, they certainly came with the intent to deceive. Greece's problems and the euro are inseparable at this point. And if Merkel's intent is deception, the problem could be worse than imagined.

 

MMS

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well..

maybe China and Middle East are pushing up the Euro anytime it comes down !!

or this maybe a bubble like the Housing Bubble in USA

and the Oil bubble which went to $150 per barrel and then popped !!

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Or maybe its just a result of the euro being the only major currency to invest in because the USD is so shot and the debt problem is not just a result of the Europeans having too much debt, but the US politicians having the same problem?

 

otherwise, when do you ever believe a politician and think they really have a grip on economic forces? :)

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"Still, America's "exorbitant privilege" of never having to settle its trade deficit in anything but its own currency isn't a benefit that China, or the Eurozone, looks too keen to enjoy for themselves any time soon. Both regions continue to seek export growth, and so neither would welcome the exchange-rate rise which would come with being the monetary lynchpin."

Adran Ash

 

Are these the world's four worst currencies?

 

JPY USD EUR CNY

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otherwise, when do you ever believe a politician and think they really have a grip on economic forces? :)

 

Politician are the best signals to do the opposite, so in a sense I do believe them! ;) But the sad fact is, the politician is just getting economic advice from a 'ivory tower economist' and is spinning it in the best light until everything goes to sh*t.

 

MMS

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The week ahead looks pretty exciting for interest rates with four decisions coming: Australia on Tuesday; New Zealand on Wednesday; and the eurozone and England on Thursday. Sure, Australia and New Zealand may not seem significant, but any rate hike adds more pressure on the Fed to do the same. In particular, the Australian dollar - a favorite of the carry trade - pressures low-rate currencies.

 

Of course, the ECB's rate decision will be most significant. Trichet again has an opportunity to take a lead in the world. Unfortunately, he probably won't act and will leave the rate unchanged. Though the euro has made a tiny recovery, I don't think that it will hold. In the next month, I expect volatility within a controlled range until the Fed makes clearer announcements about the future - unless the ECB does actually raise rates.

 

MMS

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What the hell is going on with the euro? The headlines continue to report the worst from Greece and the rest of Europe, yet the euro continues to get stronger and stronger. Common sense suggests that bailouts would be a bad sign for the euro?

 

MMS

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which is in worse condition - the US or the EURO - if you want to sell the EUR, which currency will you buy.

and since when does common sense have anything to do with the markets?

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On second thought, yes the bailouts are bad for Europe in the long run, but for the prospects of higher interest rates in the short term, they could be very useful. And as a result, currency traders are likely expecting higher interest rates sooner, and hence the currency is rising. You mean the markets don't move logically? Darn it - all these years and all that lost money! ;)

 

MMS

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logic usually comes with hindsight when the successful soothsayers can say - i was right.

Even when the real reason for the rally/fall was not because of their reasoning anyway!

 

Personally I have been waiting/waiting/waiting, and my call is look to start putting on shorts in the EUR USD now - however you normally do it for a larger move down. I will be looking to put on shorts with close stops and build them - it all depends on how aggressive you want to be in terms of waiting to sell into rallies or short the down days - up to you.

(this is all personal opinion of global marco ideas, and is not based on any real technical reasons except that if you look at the weekly charts, this could potentially be a lower high in a series of lower highs)

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Well this is a good chart to look at:

 

GoldHadBigFrequentandSharpSell-OffsDuringtheLastMania.png

 

Looking at this, I believe this little run-up in the EUR is just the inverse of the correction in gold, and will be the first of many. I'm still long gold and short EUR. And just like you these are more macro thoughts vs. technical charts.

 

MMS

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on having a look at it, the last little rally has moved to give me my first entry....

a simple retracement so I can sell into some strength.

red line shows where i would be likely to stop out (its not hard and fast as i dont wish to be spiked out) and its larger than normal as I expect that the upward trend could have a little more in it. But ideally if i can start to build positions as they go my way....it would be nice...so start with some small qtys first. I would also like to see the low of 1.4570 taken out for a little for negative confirmation.

Normally I like to go with the trend a bit more and sell into weakness, which I hope to if any downtrend progresses, but I have been patiently waiting for this one and so realise I am going early. ....except the weekly trend is arguably down from jan 2008 :)

EURchart.thumb.gif.39956cf0c09c96e5313ae1a7d20b2650.gif

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Most of us are not long term traders and do not hold our position for long.

 

The words long term is a relative term.

For some people long term may have different meanings than other people.

 

What I am saying is most of us do not hold a position for more than a week and fewer people hold for more than a month.

 

This is definitely true for our personal finances..

However if you are working for a hedge fund or other financial company or bank this would be different.

 

This is an interesting thought...and hence when people talk about Dollar versus Euro...and long term predictions about Greece or something like that....well it is important to know that people are talking about a year or two or three years

 

Most of the traders I have come across are trading in minutes or hours of max one week.

 

Just my personal two cents.

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Most of the people look at Total Debt of a country versus the GDP of the country

for example people look at Greece and say well...this means they have to pay $47K per person and US people have to pay $42 K per person

 

This is very high....US cannot be far behind Greece

 

But when a Financial institution gives a person a loan they look at other factors also.

 

One of the major factors in the favor of USA is the assets we are holding.

Our Assets are the nuclear technology/ Computer technology/ Oil exploration/ Space technology and so many other things. We have big oil fields in the Artic / Alaska

 

So....These are just some of them.

 

Hence I suggest Please do not discount USA as being on the border of Bankruptcy

 

Of Course I am not a Financial wizard ...I am an average Joe and I know some stuff (maybe it is wishfull thinking...since I live in USA and I am a US Citizen)

 

who knows ????

 

Only time will tell...and maybe we shall read about this in some history books ....right ?

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ourfxdad ;)

Hence I suggest Please do not discount USA as being on the border of Bankruptcy
All my flippant and lousy ‘commentary’ in this thread is centered around the corrupt money system, not the net worth of the various nation states. If resources and net worth is included as criteria then we’d have to look at who controls those assets… average joe ends up in about the same straits either way…

This is not a prediction, just an assessment of probabilities – things will likely get tougher for the citizenry all over the world before it gets better whether the ‘nation’ is ‘bankrupt’ or not.

 

The same basic opportunity has been in place for the USD for years and years now. A good cyclic USD rally would, in my mind, present the opportunity again - whether the ‘nation’ is ‘bankrupt’ or not

 

hence when people talk about Dollar versus Euro...and long term predictions about Greece or something like that....well it is important to know that people are talking about a year or two or three years
Yep, we haven’t been very clear about timeframes. But mine are all snippet, button pushing posts, not in depth elucidations. The timeframe of the snide little OP is decades. The observation was that since it’s peak about this time of the year in 2008, ‘every’ ;) time the EUR rallies is an opportunity to short that sht out of it and that approach would hold up on all but the shortest timeframes. 07/07/11 most recent tradable example.

To be “responsible”, I should note that the efficacy of this approach could end any day… no one really knows and it wouldn’t end or continue because the ‘nations’ involved are ‘bankrupt’ or not

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