What type of reaction could would see in the currency markets, more specifically in regards to the USD against the majors. And why? Thanks.
An excellent question! Based on the experience of the Chinese "mini-crash" of Feb/March 2007, the carry trades would unwind. So the USD would fall against the JPY and maybe also the CHF, but go up against everything else. I would short AUD/JPY as first choice in such a case, as AUD is a carry currency and a commodity currency, both of which would be hit by a Chinese bubble popping. Maybe short NZD/USD and GBP/JPY too. I like to keep some carry pairs spare for some counter-trend scalping during these unwinds...CAD/JPY for example. JMHO....