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Well that is the ‘word on the street’ in Asia where I am currently travelling.
But this could be mere posturing before the G20 meeting in South Korea this week.
We technical analysts look to our charts to see is there volatility and in particular look at the Bollinger Band which is a useful guide as to what has been happening up to this point of time. So let’s look at a couple of examples:
US$Euro:
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US$JapYen:
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US$ADLR:
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But what we can see is that the bands have been quite narrow and travelling in parallel fashion for some time.
What I have not shown is the Elliott counts – and these show a major high/low ahead and when this is reached – yes we could see some fireworks.
There of course is nothing new in the on-going scrap between the USA and China. And in fact one of China’s rating agencies has downgraded USA sovereign rating from a AA to A+. Now many may see this as impertinence and may even scoff at the move but they do have a point in that the USA does have a deteriorating debt repayment capability and this only supports the view of many economists that this could lead to a deeper longer term recession some time ahead. Printing another $US600 billion to pump into the US economy will merely compound the path of a falling US dollar and thus strengthening of the currency of trading partners making it tough for their exporters. So some of these trading partners - like China will merely peg their currency at an artificial low. And therein lies the rub. And many would argue that countries such as China should not rely on the West to feed their factories – rather they should do this from domestic demand.
Maybe posturing but the next few days we will see perhaps some cold water thrown over any heated argument in order to at least reach a compromise so that a consensus will prevail.
And then everyone will leave Seoul and go home and merely continue to run their own race. And G20 will be a mere memory.
Enjoy the ride
Tom Scollon
Chief Analyst |