Just one thought on top of all the technicals shared here.
World has become more interconnected, than most people think. If EUR is a parasite, if it'll break up and die and based on thoughts of many people, the sooner the better, etc... why is it still alive? And why is it so expensive? I am saying expensive as in my humble opinion, EUR is a good thing, but should never reach ridiculous heights where it was (I'm referring to 1.65:1 with US$).
Reason for past situation can be find in 2 things:
- Fundamentals: demand and supply. EUR was expensive as Europe is export oriented, so EUR as currency was in high demand.
- Speculative: one thing is, that export successful economies are treated as successful, so everybody wants to rider their success (in fx this means you buy their currency as it's getting stronger and stronger and this additional buys also add to this)
- US$ reasons. USA is financing their life style and spending for decades, because they can. US$ has the status (still) of safe heaven and backup currency. Add to this the fact, that everybody wants to export to US market. What you get is a checque with unlimited value to print money. And you can do that, because everybody except USA MUST buy excessive dollars to keep it's value low in order to be able to export to US market.
Isn't it funny, that China, Japan, Europe, worked hard to earn money and with this money they had to buy US$ in order to be able to work more?
But.... times change. For example, Europe has become bigger market for China than US. China tied value of their currency to US$ to refrain from above problem. Etc. What does this mean? That nations compete, who will have cheaper currency in order to be able to provide work for their nations.
And where does this lead to? Several points:
- Germany NEEDS PIIGS in order to keep common value down, or they'll bust
- China and others need European market, or they themselves will go bust
- USA needs US$ to be cheap and EUR strong, or they'll go bust
So, even though fair value of EUR would be parity with US$, this cannot happen in weeks, or months. Or, even if it does, it cannot be sustained for a long time. Why? Because world economy will implode, starting with China and USA.
So, think about that when predicting future, because.... if we do get to that levels faster than economies can adopt to changed balance of powers, we will not see financial wars between central banks as we do now. If that happens, depression is the best thing that can happen. The worst? You really don't wanna know.
EDIT: I apologize for simplification of certain things, but that was done with the aim to make it understandable and readable within this limited post. And this is only my opinion. I hope I’m wrong, but I doubt it.
BR
World has become more interconnected, than most people think. If EUR is a parasite, if it'll break up and die and based on thoughts of many people, the sooner the better, etc... why is it still alive? And why is it so expensive? I am saying expensive as in my humble opinion, EUR is a good thing, but should never reach ridiculous heights where it was (I'm referring to 1.65:1 with US$).
Reason for past situation can be find in 2 things:
- Fundamentals: demand and supply. EUR was expensive as Europe is export oriented, so EUR as currency was in high demand.
- Speculative: one thing is, that export successful economies are treated as successful, so everybody wants to rider their success (in fx this means you buy their currency as it's getting stronger and stronger and this additional buys also add to this)
- US$ reasons. USA is financing their life style and spending for decades, because they can. US$ has the status (still) of safe heaven and backup currency. Add to this the fact, that everybody wants to export to US market. What you get is a checque with unlimited value to print money. And you can do that, because everybody except USA MUST buy excessive dollars to keep it's value low in order to be able to export to US market.
Isn't it funny, that China, Japan, Europe, worked hard to earn money and with this money they had to buy US$ in order to be able to work more?
But.... times change. For example, Europe has become bigger market for China than US. China tied value of their currency to US$ to refrain from above problem. Etc. What does this mean? That nations compete, who will have cheaper currency in order to be able to provide work for their nations.
And where does this lead to? Several points:
- Germany NEEDS PIIGS in order to keep common value down, or they'll bust
- China and others need European market, or they themselves will go bust
- USA needs US$ to be cheap and EUR strong, or they'll go bust
So, even though fair value of EUR would be parity with US$, this cannot happen in weeks, or months. Or, even if it does, it cannot be sustained for a long time. Why? Because world economy will implode, starting with China and USA.
So, think about that when predicting future, because.... if we do get to that levels faster than economies can adopt to changed balance of powers, we will not see financial wars between central banks as we do now. If that happens, depression is the best thing that can happen. The worst? You really don't wanna know.
EDIT: I apologize for simplification of certain things, but that was done with the aim to make it understandable and readable within this limited post. And this is only my opinion. I hope I’m wrong, but I doubt it.
BR
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