USD: The Sleeper Trade of the Decade?
Given the current state of global economics, is it fair to say that the country with the best economic policy making team will have the strongest currency over the next 10-years? Despite its political disparities I think it’s fair to say, IMHO, that the U.S. currently has the best economic team in place. Having a strong military helps, but being able to maintain the reigns of commerce and currency, as they did in in 2009, ultimately determines where the money flows. This is why the U.S. has always been the world’s reserve currency. Non-U.S. funds/investors have a keener understanding of this than many Americans, because so many Americans are fixated on the conflict between Republicans vs. Democrats, and aren’t aware of the advantage the United States’ economic team has in experience and resources over her trading partners. For so many traders and market watchers the U.S. teams expertise relative to those of her trading partners became obvious at the G-20 meeting last month in Toronto. The majority of G-20 participants however disagreed with the U.S.’s teams position, and decided to discontinue the game plan which worked so well in ‘09 and earlier this year. From the great trader and market watcher George Soros’ perspective, in his recent interviews, this could prove a mistake. It’s also an occurence that down the road will prove one side right, and the other side wrong; and as goes the victory so too the money.
Sleeper picks for the next Decade: U.S. Economic team & Currency
The great fear of wealth distribution held by so many conservative Americans may well come true, not by taxation, but by capitulation selling of stocks and buying of gold by a generation of U.S. investors who are more focused on the next leg down in a stock bear market, and not on what happens a few years out. The world will turn and it’s safe to say that markets will to, and continue to go both down, and up, in our lifetimes. Given that, can the tide be turning up for the U.S. Dollar?
These 30 year charts above show a modern currency cycle of 5 years down for the D-Mark$ /EURUSD, followed by 10-years up. The same cycle plays out in the price of gold in U.S. dollars.
From this 30-year perspective being overweight gold and short U.S. securities does not appear to be very appetizing position to be right now.
Likewise, from a long-term perspective being long Japanese yen versus the greenback at the wrong end of a 10-year cycle doesn’t look particularly palpable today either.
One thing we can always count on: the world will turn.
Jay Norris is the author of Mastering the Currency Market, McGraw-Hill, 2009 and a Trading Instructor at Trading-U.com. To see details of Trading-U’s available course work go to Trading Course
DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. Risks include the potential that changing political/economic conditions may substantially affect the price/liquidity of a currency. Investors may lose all or more than their original investments.
These guys are so good they CAN sleep on the job….I wish i be just as cool….
Great Blog