Watch the US$
by, 23rd-July-2009 at 12:37 PM (1587 Views)
As usual, the decline in the US$ is beginning to worry the "vested interests" that want to see a "stable and a strong US$". Looking at the DXY index, there's every chance that the US$ will drop further, probably to 77.50 or around there before making a bounce.
Timing wise? Well, try Gann or Gun or Guru Whatshisnameagain... or you can try the political angle - this coming Jul26-27, there's a planned meeting between the Chinese and the American, between Geithner and his Chinese counterpart... as usual the talk will cover everything under the sun including how good the "dimsim" taste in NY and/or the recent Masterchef finale on TV Australia...
But most important of all, it's the value of US$ and the American policy of a "Strong US$" that the Chinese is interested in, due to their outsized exposure in the US$ and their on going support of the US$.
Let's put it simply - without the Chinese support of the US$, the American economic recovery will collapse overnight. It's this simple and that's probably why one can expect Geithner would utilise all his charm and assurance, to the Chinese, again emphasising that a strong US$ is in everyone's interest including the Chinese'; something the Chinese knew of course but to them Chinese the thrill of raising their concern is proving to be so much fun that they just don't seem to be getting tired of it... and of course there's another hidden message in all these friendly banters and reminder in this kind of get together - that is, the Chinese want the American to know without a shred of doubt that they, the Chinese have theirs, the American's ball in their hand.
"... so please sing some soothing song to us one more time? Ok? Be nice to us! "
What a lovely couple.
So what would be the result? Or outcome? Nothing much really. The American will reiterate their policy of a strong us$ (note the small case) whilst the Chinese will repeat their singsong policy of keeping their RMB stable by sticking to a narrow band of exchange rate to the US$.
in practical term to the currency traders, that would mean watch your stop loss at round July 26 onward. It's getting too easy to make money in forex these few days, hence watch your back coz there's always a calm before the storm.
Or easy money before you lose your capital?
Dig? And caveat emptor, 'tis just one man's view.