#Government Shutdown - a Showdown of #Currencies ?

What it means to me... a #Fundamental Outlook of how I intend to approach the market.

It is no surprise that many traders do realize the actions of the #Federal Reserve can have global repercussions.

Call me a #USD Bull if you have to but that is what the Fundamentals are saying...

here is why I say so...


Three Quarters of 2013 goes by, then suddenly The US #Government Shutdown is the main theme of the Year. As discussions of a potential US default by October 17th gain pace, the market seems relatively calm. USD is sold across the board.

When Bernanke talked about tapering in July, he drove global bond yields higher, creating a problem for many other central banks. Now, his decision to delay tapering poses a problem for #central banks of #Japan, #Australia & #New Zealand (export nations) who have been expecting the USD strength to ease pressure on their currencies. A rise in their currencies would make their goods & services more expensive, which in-turn hurts their economy.

If global currencies continue to strengthen versus the USD, these other central banks will feel the pressure to drag their economy with easier monetary policies. This actions, some feel could plunge the world back into a #Currency War. - who can devalue their currency faster - a race to the bottom!

At the same time, "easy monetary policy should provide underlying support for the U.S. recovery, helping to boost the export activity of other nations".

The US government shutdown is not what primarily worries the markets. The most important question is, how to avoid a US default by October 17th if the debt limit is not increased. The longer a budget agreement is not met; the heavier the speculative fear will become. This pent up fear, becomes stored energy which when released can become pretty explosive.

I feel tapering is inevitable and should occur before mid 2014. The USD strength is sure to return. Question in all our minds are - When to buy the USD? At least, that is the question in my mind and it has been for quite some time now.

Call me a USD Bull if you want to but that is what the Fundamentals are saying...
& it does not mean that the USD will rally tomorrow or the week after

Have a pleasant weekend & a fabulous trading week ahead...
CHEERS !!