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My Trading Tutors newsletter articles over the past month or so have described Europe (and the European debt crisis) as being the “flavour of the month” in the financial media. This means that whenever a market has gone up or down, the move has generally been attributed to something that has happened in Europe that day.
Bullish or rising markets are often linked by the news to ‘easing concerns’ in Europe while bearish or falling markets are often attributed to ‘growing concerns’ over Europe.
I find it interesting that since the middle of last year, we have heard very little about the growing debt concern in the United States.
It was less than a year ago that the United States was on the brink of default when their debt ceiling of 14.3 trillion dollars was reached. To get an idea of the size of that figure, try typing 14,300,000,000,000 into your calculator!
I can certainly remember the panic at the time and the uncertainty about how the situation would unfold. Thankfully, the crisis was averted – by raising the debt ceiling! Imagine you were up to your eyeballs in debt and the bank was knocking on the door. Do you really think that increasing your credit limit is going to help you?
Here is a link to a news article on Bloomberg.com from August, 2011 that describes the debt ceiling increase.
When the debt ceiling was increased by 2.1 trillion dollars (to 16.394 trillion dollars), spending was supposed to be cut by “2.4 trillion dollars or more”, so that the deficit could be reduced over time.
A year later the US Debt has actually increased to 15.8 trillion dollars – 10% more than it was a year ago! If this was a big issue a year ago, it certainly won’t be any easier to tackle it this time around. Yet barely a whisper has been heard about the growing US Debt. All eyes have been on Europe.
Well, here is a forecast for you – in the weeks and months ahead, the focus will shift back to the US and the same stories that were reported last year will be heard again. History will repeat itself.
In April of 2009, I ran an online Currency Forecasting Seminar based around the US Dollar and the Japanese Yen. At that time, the big picture market cycles indicated an April top followed by several bearish years for the US Dollar, as shown in Chart 1 below:
Chart 1
click to enlarge
The US Dollar has stabilised since reaching a low of 75 against the Japanese Yen last year but it has yet to make a convincing move to the upside, which suggests to me that the bear market is not yet over.
I will be discussing this setup in its entirety, including its likely completion date, in my only Currency Forecasting Seminar this year on 22 September.
In the meantime, keep an eye on that US Debt.
The clock is ticking.
Be Prepared!
Mathew Barnes
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