If the USD is intervened...

Discussion in 'Trading' started by BosyBillups, Mar 20, 2008.

  1. Probably an obvious question here, but there has been extra grumblings (especially in Europe) that if the USD falls much lower, they will intervene.

    Assuming this is a concerted Central Bank effort (i.e., multiple CB's on board), what are the short-term trade ramifications?

    USD blasts north, EUR falls South.

    What else would you look? And would the currency necessarily take off right away, or would it take some time?
  2. cold


    intervention is an empty threat

    if you understand ways intervention CAN be applied in FX system

    you would see its an empty threat

    EU can buy USD and push it up, and end up hurting themselves

    EU can print EUR and devaluate their currency and they still lose

    EU can decrease and increase i rates, but guess what The Fed can do the same and match so its a game

    you see intervention is a joke
  3. I understand. Probably most would agree that any public intervention will always cause more damage than not.

    But we will need to trade this one way or the other, and it could be a major market moving event. How would you trade this? I'm just wondering if it can backfire, i.e. once it's announced, the USD could go down, along with other currencies...
  4. cold


    man look, I know what you are doing, you see dollar so low and you think

    damn it, there is gotta be a good place to buy now

    well guess what, every 5 min there is a good place to buy if you are scalper

    but if you are thinking longer term, keep in mind THE FED, (organization none of you know anything about)

    THE FeD is not done destroyin the dolla
  5. Read up on "J-Curve". Basically, the J-Curve theory states that when there is a currency devaluation, initially things get worse before they improve when you have a trade deficit. You see a sudden depreciation in the exchange rate even as exports rise. Eventually though, after this "spike down", the deficit begins to balance and the currency exhange rate stabalizes.

    I actually think we are seeing this right now with the dollar. Give it 6 months and I'm willing to be that the dollar will start to see some real strength.