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May 14, 2018 | All Eyes Are on the Euro
Rick Ackerman
The Euro/USD looks to have made a temporary low and should bounce a bit here. We don’t normally discuss currency pairs and the Forex market at Rick’s Picks but it’s important to understand what’s happening globally to understand what will happen domestically. With the constant bashing of the Fed compared to what’s going on in Europe the U.S. Fed looks like the Rock of Gibraltar. When you buy a U.S. Bond you are buying a bond representing all 50 states. Can you imagine buying a California Treasury Bond or a Florida Treasury Bond all with different yields? That’s exactly how the Euro was set up, with each European member having its own bond instead of a unified bond market like we have here in the U.S.
This is the Euro’s fatal flaw and this is why the German Bund is trading at 200 basis points lower than the equivalent U.S. treasury, because German Bund investors think they are going to get Deutsche Marks when the Euro finally collapses.
Once the Euro/USD bounce to the trendline resistance concludes (could take a few months to play out) it’s easy to see it dropping into the abyss below the critical 1.16 area and all hell breaking loose in Europe. Not only is this going to fuel the flight to U.S. equities but also catapult the U.S. dollar much higher. How high could the dollar go? The 1985 highs are not outside the realm of possibilities.
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Rick Ackerman May 14th, 2018
Posted In: Rick's Picks