The technical charts are just starting to show a move away from the Usd, and towards the major pairs in the near-term, in-line with global equity markets holding support. The question now is; will the U.S. bailouts continue to support the dollar if equity and oil markets move higher?
We have heard of rescue packages, increasing public/private bailout numbers, and the Federal Reserve being not only the lender of last resort but also the one who absorbs the losses until such time that they can be repaid. Retaining the economic status quo seems to have a high price to pay, but the consequences of not reacting may have had a far worse impact on economic growth and stability the administration says. But, where is the money coming from?
The fact that there is no access to the main U.S. money supply numbers makes it hard to actually see the value of the new notes getting printed that cover the debt, and that creates a shroud of mystery over the mortgaging of future U.S. debt levels. By absorbing the debt now, however that is done, and pushing out the final repayment date on the debt-mountain mortgage, it all rolls into one huge repayment schedule with those being paid looked to as the ones providing the new loans to make the payments.
The current Treasury situation is like average Joe taking the car payment, the credit card debt, and the bass boat repayment, and adding them to the 30 year home loan; it is an easy fix, and maybe the only choice. TheLFB-Forex.com Trade Team said. In reality it may not be the smartest financial move but if it is the only option, it gets done. When the Fed's back is against the wall anything is possible, forget the next 30 years of repaying it and forget the end cost of it. Most eyes are fixed on getting through this month it seems, and that outlook seems to be the same that the Fed is taking with the current debt issues and Usd valuations.
The world accepted the U.S. ultimatum in 1973 to have paper debt from the U.S. or get nothing, as the gold standard was scrapped. Since that time the major global economies have continued to buy U.S. debt under whatever circumstances, and they now see something in the dollar valuations that needs protecting. The U.S. may not come out of the last five years of global economic change as the same global powerhouse that it once may have been, it may have to share that role with two or three others, but we have to accept that the U.S. dollar, and the U.S. economy are vital to global growth.
Without a robust, highly debt leveraged U.S. economy the world is an entirely different economic place, and that is why the debt-mountain may not be that important to dollar valuations right now. It will be, there is no doubt the fact that massive U.S. growth needs to be built, sustained, and then expanded heavily if the 30 year Treasury notes are easily able to be maintained, but right now the dollar buyers are happy to hold 84.00 on the dollar index.
Whether we like it or not, agree or disagree, the dollar will get bought as the global economies feel the impact of the last 12 months of trade. Once oil gets back above $65 a barrel we may see a short dollar trend form on the majors, and we may see an equity market that ends the year deep in the green. Until then, and until global economies report GDP and economic growth ahead of the U.S., we may just see the major forex pairs trade in four hour channels. One week up, one week down, until 84.00 on the dollar index gets broken, held, and added to short. the Trade Team said.