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As always the market has overshot fair value.
Soon the cost of carry will favor the USD over the EUR
after next month's FOMC meeting when Fed rates will surpass that of the
ECB's.
http://www.fxstreet.com/nou/continguts/centralbanks.asp?
menu=interestrates
The Eurozone is sitting with 9-12% unemployment and with oil headed
back down to $33-36
in the first quarter of 2005, there is little need to help Europe with
a stronger Euro to defray such costs
and can work on the unemployment problem they have.
Though the US economy is the envy of the rest of the world, the
advantage the USD has is limited,
as fundamentals and technicals begin to influence trade and trading.
Friday's mention by Alan Greenspan
AGAIN of higher interest rates confirms that the USA is going to be
subjected to at least four more rate hikes in 2005.
This in-turn will make the USD stronger and cause a short term noose
around repatriating US sales abroad by
multinational conglomerates, as was noted by Friday's dip in large cap
indexes anticipating future USD strengthening.
Late in the day the euro/usd nearly lost 1.30, I see a head and
shoulders on a weekly GBP/USD. My gut sells me
that folks are piling on in the yen and I suspect intervention will be
much more "openly" predominate.
CHF is already showing signs of bullish divergence and lower oil, means
a lower loonie, as Canada is the
#1 country USA gets most of it's oil from.
I should point out that gold has a $75 limit for those of you keeping
on your toes. I'm sure if copper came a knocking'
in your account this year, you'd pretty much be on the ball already.
My only concern is the final outcome of the residential real estate
bubble. Yes it is a bubble because prices failed to
correct during the last recession. But when you're only paying the
interest, the payments are the bare minimum which doesn't
leave much room to negotiate.
Mr. Kevin B. Bantz
http://kevinbantz.com
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