Few points against shorting EUR/USD

Discussion in 'Forex' started by MrProfit, Oct 21, 2005.

  1. MrProfit


    Well, I am reading here and I am surprised so many of you are in favor of EUR/USD short trades.
    I think everyone here realised the recent pull-up from the 1.1900 level was due to a large CB demand.
    Tell me, why you think these guys buy now if they could buy at your expected 1.1300 level (!)
    I do not want to be too pessimistic here, because sh*t happens all over, but do you really think the short term support level for EUR/USD is 1.1600? Serious?

    Let me tell you this: I expect the pair to go up to 1.35 in the short term now and through the 1.6000 level next year.

    There are many significant signs of a trend change. These are:

    1) Inflation in Japan works against any intervention from BoJ. On the contrary, BoJ will favor strong Yen now. (Read Japan FinMin Tanigaki today's statement) The result could be devastating. Japan could liquidate it's dollar reserves!

    2) There is no obvious relationship between the current account balance and the USD weakness. We observe the growing deficit along with the weakening dollar. The weaker the dollar the bigger the deficit.

    3) China, per Mr. Snow's political request, is about to make its currency free-floating which may move the trade deficit higher. Some serious players think this will create a pressure towards even a higher deficit!

    4) The US economy is heavily dependent on debt. The huge amount of last years GDP was due to the Household Debt increase. The majority of the debt was the mortgage growth.
    Today we observe a downfall of the mortgage application index at MBA since the rate increase in August. (3.5%) This creates a worrying environment of market liquidity shortage and creates a real danger of slower growth in 2006. Significantly slower GDP figures, well bellow the market expectations, and WELL BELLOW THE BUDGET PLAN for the fiscal 2006!

    5) All above may lead to slower CPI growth in the beginning of 2006 and force the FED to cut. I must not mention what would happen to the dollar index afterwards.

    6) The weakness in DOW shows a slow liquidation of long positions over the last 12 months. I expect the situation to get worse and eventually a step downfall within next 2 months.

    7) The net capital position during the last 2Q of 2004 and the 2 first Q of 2005 show a slight negative balance thus may be the primary reason for the FED to tighten. (Instead of the inflationary pressures)
  2. MrProfit


    All the above create a potential to a significant market move within next 4-5 months.

    I would strongly doubt the market can sustain a NYSE collapse along with the Real Estate market correction and move the dollar upside along with.


    Think about these risks before you enter any significant long position on USD in the coming months.

    Myself, I think long about EUR/USD now. I think we will observe many sharp market moves due to large differences in yields in the debt market due to the FED tightening. However, I think that NO significant interest rate rise is capable of stopping the USD from the crash in the beginning of 2006.

    I welcome any reasonable comments.
  3. TA tells me that this is quite plausible.

    I am watching the present market action in the indexes too and am amazed at the euphoria two days ago about a bit of an upmove.

    If the participants get so exited about a little up wiggle then I hate to think about the pandamonium we will have if a few of these down wiggles appear: the flood gates may open up.

    I feel the effects of the present hurricane season have not worked their way through the system yet, it may become a very cold winter for many American households. If observation is anything to go by: Did not see much retraint in driving habits when oil prices went up. That means that the price has to go up a LOT before they'll think about changing some habits. And with heating the mansions the people will show even less retraint: we cannot heat only the living-room can we?

    Once the indexes start to slide then foreign investment will park their money elsewhere and not in the US markets. Demand for the US dollar will dry up and it will make the Asian currency crisis look like a picnic. It will be ugly.

    (piss pot Pete)
  4. MrProfit


    Do you mean the Dollar Index up wiggle?
    Or EUR up wiggle?
  5. No the wiggle in the stock indexes two days ago. They were all screaming "the market has resumed its uptrend" LOL

  6. MrProfit


    I don't gamble on NYSE. I just watch it.
    Take a look at this website where you can see what I refered to:


    It is so obvious. Poor small investors.
    They are just about to loose the last pair of pants there.
  7. For you guys to consider....

    <img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=874709>
  8. MrProfit


    Yes, this is what I am talking about.
    A big, quick move through all the levels of support over the 1.36 and up.

    It is clear.

    I'd add the green line is Mr. Gold and the red bellow is Mr. Market weighted U.S. of A Dollar.

    Thank you very much for your attention.
  9. oh ... but the gold price has rallied against almost all fiat currencies since the beg of sept.

  10. MrProfit


    EUR/USD heavy, but still above 1.1900
    #10     Oct 24, 2005