In the past few years the US dollar and the Euro have been getting stronger against the British Pound. When you invest in Euro and trade in CHF your currency gains value. It is very easy to use currency pair to predict future behavior. So there is a lot of room for manipulation by these traders.
Euro has gone up during the year as it is becoming strong. And CHF too has had a great run as it is actually trading at its lowest price ever before. As I said the timing of these moves can be a bit difficult.
During a time when the US Dollar is weakening, people will often trade in Euros to get some of their investment back. One trader, who has enjoyed an excellent run on Euro trading has been Dennis McDonald. He is worth almost one billion dollars and has been successful with several products, among them Forex. Dennis has done his research and understands the market.
Dennis is not afraid to make changes if it will benefit his business as he believes in the longevity of the Euro. And the fact that the US Dollar is weak, he wants to take advantage of the current situation by keeping a lot of money in EUR and trading in CHF.
The main reason why Euro is on its way to increasing is due to the Fed policy change of cutting the money supply to the banks. Some fear that this may result in the US Dollar strengthening. It will be interesting to see how the Dollar reacts.
It will be interesting to see what will happen in the Chinese Markets. We all know that China has an economy that is built on manufacturing goods and services and is dependent on foreign trade. And as a result many traders have had a good run trading in CHF.
We also know that the Chinese People are so dependent on currency trading volumes, and they have a long history of being easy to manipulate. This might help them, but this can be used against them. The Chinese are intelligent enough to read patterns.
If China allows CHF to rise in value and then has a fall, this will make the USD stronger than it was before. This means that for that period of time it will be cheaper to buy US Dollars than to buy Euros. Which will push the currency higher, causing even more risk to the buyer.
But we have seen that a large number of investors are still buying US Dollars against Euros. So, let’s just see what will happen in the Chinese Markets, and whether the UK Pound will weaken. This will give us an indication on what will happen in the Euro and CHF markets.
If the Chinese are allowed to weaken and there is no reaction to this in the US Dollar then maybe it could start to take advantage of the situation. But, I still don’t think that the Chinese will allow any weakness. This would mean that the Euro may start to weaken and this will make the US Dollar stronger.
My recommendation to all, especially those with euros in their portfolios is to hedge the position, and don’t keep it in Euros in the face of falling US Dollar. If it is important to trade in Euros then why not protect the same with hedging would look more attractive in this situation.