Inside the Currency Market: EUR/USD

Regarding China comments 2 days ago and the question to price the Yuan. Since China entered the world again upon the comments in the 1980’s by Deng Xiaoping “to be rich is glorious”, the Yuan currency was Fixed. The convention of the currency Fix dates its history to the industrial revolution and most probably long before. The Fix is a means for nations to price their currency to allow a Reference rate in trade, to sign trade contracts, to adjust money supplies in banks, to add debits and credits to bank accounts, to allow banks dealing rates, to adjust interest applied to contracts, bank accounts, sales deals. The list goes on. The FIX is the tradition of currencies and prices adopted by every nation in the world for the past ? 130 years. China’s deal is to refuse to Fix the Yuan and instead employ the close price from the previous day. China now wishes to go against the grain of tradition. Its a dangerous predicament because other nations must decide the value of their currencies in relation to the Yuan. The remainder of the world doesn’t price or value their currencies based on the close price nor do I understand how it could ever be done. So China puts the world in a dangerous position. Never could currencies actually Free Float. The term doesn’t exist. Currency prices are managed and dictated by the central banks.
China’s goal was always to force acceptance of the Yuan. The current proposal for the Yuan to be included in the IMF’s SDR basket has been debated and requested by the Chinese going back to the 1980’s. The debate heated up in the 1990’s when the first George Bush granted Most Favored Nation trade status to the Chinese in 1990. Then the United States was inundated with $200 million per year in shoes manufactured by the Chinese. Then other products then more and more. Now we are supposed to go with the idea that the Yuan is legitimate after only 25 years out of China’s latest hibernation. To understand the Chinese, they date their tradition 5,000 years. They claim the moniker kings of Asia because they gave the Asian language and writings to all people of Asia. But through 5,000 years when China joins the world, they stay until they go to war or are attacked, offended then they hibernate until the next time when they come out. Look at China as a flower, they blossom and wilt over periods of time. When they blossom, they claim the world prospers and loses when they hibernate. People bow to the Chinese and China expects nations to bow to them because they were the first nation on the planet. They are slow yet methodical but always with eyes on the prize to legitimize the Yuan and to become the kings again.

EUR/USD. target this morning reached 1.1150, 14 pips shy of target. Bottom. 1.1086. Range above 1.1231, below 1.0950. See ranges are dynamic, never fixed. Overbought sell point 1.1206.

Strategy. Shortest term. Shorts from 1.1150 target 1.1113 then Bottom at 1.1086. From 1.1150, 1.1146, 1.1141, 1.1131, 1.1119, 1.1113.

Brian Twomey Inside the Currency Market,


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