In the end it’s all about the money and more specifically what happens on the currency side. Although Forex trading has effectively been turned into a small sideshow in the United States, due to stringent Dodd Frank regulation that mainly affected retail traders, it would be a mistake to not pay attention to what’s happening on the currency side. And what I’m seeing across the board, on a long term basis, is rather disconcerting.
Frankly the overall theme does not require much explanation and I will let the charts do the talking. Here’s the EUR/USD which is probably the most salient representation of what’s going on here. This thing is so tightly wound that I’m afraid it’ll snap any moment.
The USD/JPY may actually be the first one to go as it just breached upside resistance and is nibbling on a weekly NLBL. Maybe it’s pointing the way?
USD/CAD looking rather bullish but also coiling up, most likely awaiting the November election.
But wait, there’s more…
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It’s entirely possible that the smart play here is being long the USD. It’s the least smelling fish in the barrel and if it all comes crashing down – what’s the alternative? The Euro? The Renmimbi? The fickle Swiss Franc or worse, the Yen with those kamikaze pilots at the helm? Cash is a position, especially if it involves the U.S. Dollar.
Maybe I’ll even live long enough to see one of those again.