I think it’s fantastic that I’ve “managed to wrangle” a number of intelligent readers here at Forex Kong, and that these guys also offer their opinions / beliefs / suggestions and projections.
You can surf around the net for a “looooooong time” searching for some of the “nuggets” that turn up in the comments section here at the site, with a large portion of these insights coming from a “small handful” of some mighty intelligent people.
Yesterday’s post on “the proposed downward slide of the U.S Dollar” brought about a couple of fantastic “alternate views” which I appreciate in that – we enter the world of “speculation” when we start looking out over longer periods of time – where in theory “it’s impossible” for anyone to “actually know” how things will play out.
Throwing the ball around with others allows for a better perspective, an acceptance of alternate views and an “opening of the mind” should you be so closed as to only consider your own ideas, as correct.
The future path for the U.S Dollar (having such impact on all else) seems like as good a place to start as any so…..I welcome “any and all” to weigh in on this post ( as I will leave the comments section open for eternity ) as to provide a lasting resource for readers in the future.
This won’t come as a surprise…coming from me but – USD is headed much lower.
I think it’s about time – we’ve had enough of this “mucking around” at these levels, having more or less “danced around” the past few months. It’s time for the next leg down.
I don’t have time here this morning but if you want to pull up a general chart of the $dxy or in some platform (like stockcharts) $USD, I’d get your sights set on a serious of long red candles taking us down into that area around 75 – 72 in coming months.
If this “doesn’t” correspond to an “inverse move” in the price of gold and silver ( looking at is as such a dramatic decrease in USD value ) I will be forced to take on “the Habanero challenge” as I have offered several times in the past.
Up 3% overnight alone with the majority “still coming” from trades entered in GBP vs Commods in the weeks past. I suspect the Nikkei will “attempt” a solid double / retest top at 16,000 ( the high from May ) as JPY futures inversely “double bottom” shortly.
The plans/suggestions emerging from the weekend’s meetings in China are staggering!!
Ok ok….a little dramatic and perhaps overstated but get this…..
As part of an evolving proposal Beijing has been developing quietly since 2009 to convert more than $1 trillion of U.S debt it owns into equity, China would own U.S. businesses, U.S. infrastructure and U.S. high-value land, all with a U.S. government guarantee against loss!
The Obama administration, under the plan, would grant a financial guarantee as an inducement for China to convert U.S. debt into Chinese direct equity investment. China would take ownership of successful U.S. corporations, potentially profitable infrastructure projects and high-value U.S. real estate.
These points have been discussed for several years now so it’s really not anything new ( although I’m sure it’s the first you’ve heard of it ) but the message is very clear.
China will not tolerate / watch their dollar denominated assets ( treasury bonds ) go up in smoke via currency crisis and crash of the U.S dollar – BUT WILL ACCEPT HAVING THIS DEBT TURNED INTO DIRECT INVESTMENT IN OWNERSHIP OF U.S BUSINESSES AND LAND.
Finally we get a solid move on the fundamentals, as last nights downgrade of U.S debt from Chinese ratings agency “Dagong” sent the U.S Dollar spiralling down.
Now Dagong is no “Moody’s or Fitch” ( currently rating on “negative watch” ) but this in itself brings about a very interesting point.
A Chinese ratings agency having such a significant impact on the dollar? Wow.
You might expect this kind of move given that a “reputable” agency in the U.S gave the “thumbs down” on the debt ceiling debacle sure…but a Chinese ratings agency?
As the largest holder of U.S Debt / Treasury Securities on the planet it is now painfully clear how much influence China truly has. The agency suggested that, while a default has been averted by a last-minute agreement in Congress, the fundamental situation of debt growth outpacing fiscal income and GDP remains unchanged. “Hence the government is still approaching the verge of default crisis, a situation that cannot be substantially alleviated in the foreseeable future”.
Kicking the can a couple of months further down the road makes little difference when the U.S will just be back in the news then…..still unable to pay its bills.
The short USD trades obviously made big moves here overnight, but not exactly as expected. Great gains in EUR, GBP as well CHF but oddly the “commodity currencies” have shot higher. An interesting dynamic and certainly one to keep an eye on as NZD as well AUD approach overbought levels.
Gold up a wopping 34 bucks here this morning, so perhaps we’ve got the “risk off” flows on the move.
As per my posted “trade ideas” Friday, a couple of the “short USD” ideas have taken shape. In fact nearly everything is moving in said direction short of the pesky NZD. This damn currency has been bobbing around / consolidating for nearly a month and has proven to be a real stubborn pain in the ass.
For the most part USD weakness “again” appears to be the move , although at this point nearly every single chart ( looking at nearly any time frame) could almost / just as easily go the other way.
The U.S Dollar is undoubtedly the “tough nut to crack” here, and “with it goes” the rest of it so…..
Here we sit. On the fence again.Kinda.
With risk events such as the U.S Gov Debacle only days away, it makes perfect sense that currency markets aren’t moving too much, as it also remains to be seen where equities, bonds and gold will find their direction.
I like where I’m positioned here but again, am trading with 1/2 to 2/3 smaller position size than when “out on the highway” so we keep things small while we come around the corners.
Unlikely to have been mentioned on your local T.V last week, the “real big deal” had little to do with the “circus in Washington” as, quietly behind the scenes The European Central Bank (ECB) and The Peoples Bank Of China (PBC) signed China’s second largest “currency swap agreement” for a wopping 350 billion Chinese Yuan.
In an unpresedented move The European Central Bank said: “The swap arrangement has been established in the context of rapidly growing bilateral trade and investment between the euro area and China, as well as the need to ensure the stability of financial markets.”
In doing so, the parties involved avoid swings in exchange rates. They can also be considerably less reliant on the U.S Dollar for bilateral trade and business deals.
China’s central bank has now signed currency swap deals amounting to some 2.2 trillion yuan with 22 countries and regions, with its continued efforts to internationalize the Yuan and rival the U.S Dollar as the world’s reserve currency.
What do “I” think this deal suggests with respect to the long-term future sustainability of USD, now with Janet Yellen a “shoe in” for continued money printing? Continued money printing???
What do “you think” I think?
Wow. Now EU Zone looking for options moving forward.
I’ve taken profits “again” here this morning on anything and everything related to the U.S dollar as well “risk” in general. It’s been a touch frustrating spending this last week “toiling away” under the daily barrage of headlines coming out of Washington, and as the days wind down to the “ultimate stand-off” on raising the debt ceiling limit – the likelihood of resolution increases.
These buffoons can’t possibly be so stupid as to actually risk default, and yet another damaging ( if not killer ) blow to American credibility on the world stage. I’m not sure I’ve ever seen anything more embarrassing for a country’s government, as daily news “across the entire planet” has this “top of the list” of blunders – LET ALONE THAT IT’S 100% COMPLETELY SELF IMPOSED!
It won’t be war, and it won’t be terrorism oh no…no natural disaster or alien invasion will do it nope. The American government can just step right up and get the job done itself. Absolutely unreal.
Trade wise….there is no doubt the media / Wall Street will “rejoice” a resolution, and rejoice in the knowledge that the ponzi scheme is safe and sound for another couple of months.
Commodity related currencies have traded flat as pancakes, GBP has pulled back, and for the most part its been a complete “ghost town” out there leading up to this trainwreck completing.
I’m up 3% and back on the sidelines – waiting a day or two to see how things shake out, looking to take a shot at the “pop” on resolution. Then “back with the bears” into the new year.
Something important came up in the comments area last night, and I thought it worth pointing out.
When we consider the impact of a “flight to safety” ie…….a move in markets where “true fear” pushes investors to dump risky assets ( and to literally….seek safety ) it’s impossible not to consider the U.S Dollar as being “top of the list” as the place to run and hide.
Now, this may seem “counter – intuitive” considering the recent ( and ongoing ) blunders within the Unites States but – that’s not even the point. Take a look at the chart below and note the total % of global currency trading for the top 10 most widely traded currencies in 2013.
That’s 87% of transactions to include the U.S Dollar, compared to a piddly 33.4% for Euro and only 23% in JPY rounding out the top 3.
As a simple matter of “default” when risk comes off and investors get scared – there is absolutely no question that USD will take massive in flows, as risk is unwound and risky assets and investments in emerging markets are converted “back” to USD.
Now, we’ve still not seen a “true flight to safety” as global markets have so embraced the never-ending flow of “free money” coming out of both the U.S as well Japan – with the general investment climate being one of accommodation. This can’t last forever.
You’ll recall I had envisioned a time where “all things U.S would be sold” and to a certain degree I see that this has already happened. Starting with bonds ( as suggested ) then the currency, and lastly ( alllllways lastly ) stocks now starting to show their “true value”.
I’m not concerned with much further “downside” in USD at this point, as one has to keep a couple other “macro” things in mind.
How long do you think the Chinese and Japanese holders of American debt are looking to stand around and watch their U.S denominated assets decrease in value? How far do you “really” think that Ben and the printing presses can push before somebody “really” pushes back?