Stock Incubator

[dalcindo]

Re: USD

Hi 3x!

Looks like additional fundamental events will provide further fuel for the USD to gain against the EUR and other major currencies as well.

In addition to investors unease regarding the Eurozone situation (still no concrete plans have been expressed to help Greece, while a suspicion that other weaker countries could follow suit as well such as Portugal, Spain and Italy), now comes this Fed move, which is said to normalize its discount rate. Although pretty optimistic in appearance, the move follows what other countries have already done as anti-inflationary measures.

Investors might look at the bigger picture, such as recent and repeated Chinese banks to rein in on their liquidity control and that of other banks as well, suggesting a global concerns for inflationary trends.

So, when less currencies circulate, a more difficult access to a smaller pool of cash increases the cost of borrowing, further stifling borrowing powers of individual businesses - as if lending practices were not difficult as it already is.

Overall, the USD will likely gain further strengh against the EUR, not only from a safe-haven provision AND out of concerns of what is going on in Europe at large, but ALSO from a mere fiduciary stand-point: If countries in most corners of the world are making it difficult to unleash cash and boost stock prices up, then what better than the good old Dollar to reap profits in uncertain times, especially when the Fed move is suggesting economic recovery in the context of other world turmoils.

Any Fed body language hinting at sign of steady recovery (such as this distancing from an emergency borrowing rate to a more normal discount rate) will likely continue to pressure risk-seeking investors towards risk-adversion positions, thus adding more momentum to the bearish trend of the EUR:USD trend, which we've seen commencing recently, IMHO.

My current EUR:USD position: SHORT in Both day trade and now swing positions.

- Dalcindo