“But everyone’sdoing it, mommm!”
I know, I know… it didn’t work then. It doesn’t work now.
But that seems to be the line of thinking among central banks today. The Fed is printing. The ECB is easing. China, Australia and now India have cut rates all in the name of spurring economic growth.
They’re all trying to get something for nothing. It won’t work. But that’s beyond the scope of my focus… Currency trading is and it’s still a game of “relatives.”
Sure… the Fed is printing money. But that doesn’t mean the U.S. dollar will become worthless any time soon. After all, if other countries are printing more… the U.S. dollar will actually go up in value.
Here’s a chart of the euro (top) and the U.S. dollar (bottom). Both are at pivotal turnrning points right now.
As you can see, the euro just ran into resistance at 1.3600. After putting in a strong run higher, I’m expecting the euro to lose ground over the next few months. When the next euro crisis flare-up begins – which we’re expecting by mid-year – watch for the euro to get crushed.
The dollar, on the other hand, is now trending higher. It recently found support at the 79 level. This zone has acted as support six times in the past year. It seems dollar bears just aren’t able to push the buck’s value any lower.
I’m looking for big gains in the dollar over the next few months. Again, any economic crisis sparked this year will send safe haven investors back into dollar, sending it higher.
A worse-than-expected contracting of the German economy last quarter, which was just announced last week, may well be the start of a slide back into the euro zone cesspool.
You’ll want to be long the dollar when Europe reignites!