Analysis: 1st November 2011
US Economy:
This being the first week of the month, everyone is looking at the US unemployment and Non Farm Payrolls data to be released on Friday. Looking at the last few months we do not see a major improvement in the US economy but do not see any worsening of the situation either. I do not expect the Friday data to be much different from the last few months. The USD will still remain weak for some time to come, but we do see a discomfort among central bankers with the weakness of the dollar particularly with SNB (Swiss National Bank) that has been very clear on fixing a limit for EUR/CHF. We saw a sharp rise in USD/CHF as well. Likewise the BOJ (Bank of Japan) has also been intervening at around 75 Yen to the Dollar. I believe the Yen could still go down to around 69 from where we could see a sharp reversal.
Summary: Technically speaking I expect US dollar weakness to end sometimes in the next 3 to 6 months. USD/JPY can be a good buy between 69 and 75 for the long term. Likewise USD/CHF can be a good buy above previous lows and preferably as near to previous lows. USD Dollar Index will likely touch 67 to 70. How would this correlate in terms of the levels of Gold/Silver and the Dow is something we need to wait and watch. We could see a new scenario unfolding of Strong USD/Strong Gold against the traditional inverse relationship.
For all US bashers, it would be worth pointing out some interesting statistics on the US as put forth in the mint newspaper of 31st Oct. Population wise US is in the third place with 310.38 million people. Median age of population is 36.9 as against India’s 25.1. The GDP per capita is 47,184 USD. The point I am making is that US has a young population and does not face any of the problems of Germany or Japan. US remains innovative in all fields. Any lack of talented people in the US can be imported as has been the case. 70%of all patents continue to come from the US. Despite the current economic problems, US is much more likely to resolve these issues. Historically it takes US 2 to3 years to adapt to the situation. So population wise we are more likely to have social tension in India then in the US. US continues to provide good value for money in terms of investment as against many Asian countries where rentals have become a major cost. With the EU having major problems of its own and no likely quick solution, US Dollar will rule. On the political front, US simply needs to keep leaking data via wikileaks to create, chaos, confusion and division. In short US will remain supreme for some time to come without firing a bullet this time around.
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