Rise of the EUR/USD and What it Means?
If you really listened closely to Draghi today you may have come away with the idea that he was somewhat hawkish in relation to the Eurozone.
However if you read between the lines and if you really understand currency trading then all this was is another opportunity to sell the EUR/USD at higher levels. Nothing at all is resolved in this anemic economic zone and it will not likely be any time soon. A strong currency is the single factor that is keeping this region from recovering. Plain and simple. No one other than Germany can handle a strong Euro. It simply allows the other periphery countries and weaker countries to line up at the trough and get hand outs from the ECB. There is no other benefit for any of these countries to hold the EURO other than that. Like the US by keeping the US Dollar as the world reserve currency you guarantee that the FED will look after all those countries that choose to still accept the Dollar even though it makes no sense to do so. Let's not forget that when the first shock happened in the financial markets the FED handed out 20 trillion (with a T) to all the western world countries to look after their countries and deal with the problems of debt and deleverage.
Canada by itself received 1 trillion of that hand out. Of course everyone took the handout as it was free money and it assured that during this crisis the world could still depend on the USA. No one seemed to care that the entity that was handing out the free money was in itself completely insolvent. They were able to do this because of the world privledge of being able to print its own money. If it were any other country like say what is happening to Argentina once again you are in serious trouble when you get into too much debt.
However that only works when you can print your own currency.
It will not take away that the EURO still needs to fall and fall heavily because the world will not allow the bailouts to continue indefinitely without some consequence. It simply is not fair.
This is why I am still short in the long run with the EURO.
However if you read between the lines and if you really understand currency trading then all this was is another opportunity to sell the EUR/USD at higher levels. Nothing at all is resolved in this anemic economic zone and it will not likely be any time soon. A strong currency is the single factor that is keeping this region from recovering. Plain and simple. No one other than Germany can handle a strong Euro. It simply allows the other periphery countries and weaker countries to line up at the trough and get hand outs from the ECB. There is no other benefit for any of these countries to hold the EURO other than that. Like the US by keeping the US Dollar as the world reserve currency you guarantee that the FED will look after all those countries that choose to still accept the Dollar even though it makes no sense to do so. Let's not forget that when the first shock happened in the financial markets the FED handed out 20 trillion (with a T) to all the western world countries to look after their countries and deal with the problems of debt and deleverage.
Canada by itself received 1 trillion of that hand out. Of course everyone took the handout as it was free money and it assured that during this crisis the world could still depend on the USA. No one seemed to care that the entity that was handing out the free money was in itself completely insolvent. They were able to do this because of the world privledge of being able to print its own money. If it were any other country like say what is happening to Argentina once again you are in serious trouble when you get into too much debt.
However that only works when you can print your own currency.
It will not take away that the EURO still needs to fall and fall heavily because the world will not allow the bailouts to continue indefinitely without some consequence. It simply is not fair.
This is why I am still short in the long run with the EURO.
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