-- WHY IS THE US$ WEAKENING ?? --
this is THE question -- and the answer is also the trigger the mutation we are going to experience.
answering this would take few hours and lot of energy to read, and i hope other forex or cdty trader could hop on and debate--
here s my view :
on a large scale : empire last through secular cycles....we need economical history here, but that s a fact and i wont amplify on this...too large a topic.
if we reduce our TF, which means macro analysis : still a bit of history is required >>
1-back to bretton-woods where US took the lead of its own demise erasing gold (real money) from eco fundamentals, thus they took the lead and made their currency the world reserve, and other eco powers let them do, ....whatever....
2-then comes OIL, the dollar is linked to OIL reserves....we dont know what the real reserves are, BUT as we see the dollar falling we can have a rough guess of where they are standing!
3-Credit policy or the premises of Asset economy : the US shifted from a capital eco to an asset eco : this creates the famous series of bubbles, that you guys know ... those bubbles burst (tech, bonds, RE....) since it is the natural way to go! sky is not the limit and there s no fre lunch, thus the US inject massive liquidity into the worldwide economy!! and other powers do the same or the dollar would be down the drain for a long time .... see russia with 54% of liquidity injection! also see US removing M3 quotation so noone can see their perverted little game.
4-other things come into play like trade deficit, TIC (treasury inflow of capital), budget deficit, fed deficit...bla bla bla : this is directly influencing foreign investors in the way they perceive the US dollar ... this why US gov is faking, spinning and painting statistical figures, this is also why all news you are trying to trade are just Noise >> the Dollar will not come back to any level that could sustain US growth ... am talking about healthy growth, not the kind fo growth we have now : war economy, market manipulations, and massive liquidity injection! one thing you may ask : but why are the US equity markets still rising.... good one >> the TIC thingy i was telling you about is the reason! : you probably have heard about the ESF (exchange stabilisation funds) which is lead by big institutional traders, the US treasury...yes!...and Central banks ; so this is the money flowing into the US from foreigners : if the Equities drop, the TIC is DEAD, if the TIC is dead the US$ is OVER >> in such occurence, you would see Interest rates going to the sky, Real Estate plunging, consumers ability to borrow to sustain the economy would disappear, and the rest i dont want to say.
5- and WORST : derivatives ( US private and public debt is to level never seen in human history and they have part of this debt on derivatives OTC markets ) and hedge funds : i guess those will be the trigger - you heard the Bear Stearn hedge funds bailing out problem two weeks ago....this is a Sigma 10 ! .... the trigger : Billions of dollars being thrown at the market without ANYONE to pick it up : welcome Euro at 1.70!
hope i kept it short enough
.....next post for the Yen
hope that helped
exni