Debt default in United States?
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    Debt default in United States?

    Hi traders!

    You know me as price action trader, normally I’m careless about news, but this time things can be different.

    Let’s talk a bit about possible default in United States. How it will affect markets and real sector?

    First of all, I think that default scenario doesn’t absolutely make sense to politicians, either democrats or republicans. Every serious politician knows that he will do political suicide if US will go bankrupt. I should mention that market probably is not too serious about default in US. Otherwise, Gold futures would rally and trade somewhere near 1500 USD per ounce.

    Is Gold rising?

    Look at the Gold futures chart (GC) with expiration in December 2013, we see that market obviously has no interest in Gold. As you know, during financial crisis demand for gold is very high. It seems that broad market doesn’t bet on this scenario

    gold_chart.jpg



    Why is this happening?

    It started not yesterday or even not 2-3 years ago. In 2001 (!), when USA had positive trade balance, they were unable to cover a single penny of their debt. So, not surprisingly they can’t do it today. Their economic model is designed to consistently raise debt ceiling. If years before that it was considered as necessary but optional, now they simply can’t stop. So, I think, they will not allow United States to go bankrupt – dollar is the only valuable commodity for export in this country.



    If it happens, what to expect?


    First of all, don’t panic. Remember – markets will tend to act «flight-to-safety» scenario. But in this case, I would play against the crowd. We might see temporary decline of US dollar, and it would give good price to invest some cash in dollar buying cheap (of course, I’m talking about keeping ones money in currency, not about speculating and trading).
    Psychological reaction of decline is expectable, but don’t be with the crowd – step aside! In longer term perspective demand for US dollar will increase because QE program will be terminated after the default – termination of QE will bring deficit of dollars and increased demand.


    Bottom line:

    I don’t believe in default, but keep an eye on markets and be very careful if flight-to-safety scenario will start happening. No short term techniques will be reliable in this case – no levels will be working, volatility can become tremendous. Just keep an eye and be aware.

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    Thanks so much for this useful and valuable information about the united states. Defaults could be counted upon if politics is not involved most times. This is why i know that the past of the country might still continue to hunt her down. As far as the economic side of the country is concerned, it is better to check data before things goes rogue. With all these, the USA is still maintaining their stand due to politics.

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    Rookie Azis Muslim's Avatar
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    I agree with some economic expert that it is impossible for such a big country to default as Dollar is main currency around the world. This is just a rumor and drama made by Republicans. If this true then we can see that the Dollar will falling down like in 2008 when the firm bankruptcy of Lehman Brother, if I correct. It made US economic falling against all major currencies and we may say that this is an armageddon for US. Most stock and forex trader still waiting for the confirmation about this news and rumors that already spreading everywhere. It is 50:50 that default can happen or not.

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    Being a newbie I am not acquainted with many aspects of forex trading and thus I am trying to learn from each and every thread. Through this thread I am able to get idea on dept default in United States which gives me some idea on sudden market movement. Even I can see there are many impact of news in the market movement. Trading with news seems to me very important because any authentic news can change the picture/trend of any movement rapidly.

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    We all know that as powerful nd high dollar demand investors and politicians wouldn't want anything to happen to there investment,so as it is now as am writing the debt ceiling has been increased and also the government works has been called back so I would expect the market to ne technically driving hence the pressure of the is dept issue has been resolved,so I would expect currency such as Australian dollar and newzeland dollar see some gains in the nearest future.

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    Quote Originally Posted by uchexxx View Post
    We all know that as powerful nd high dollar demand investors and politicians wouldn't want anything to happen to there investment,so as it is now as am writing the debt ceiling has been increased and also the government works has been called back so I would expect the market to ne technically driving hence the pressure of the is dept issue has been resolved,so I would expect currency such as Australian dollar and newzeland dollar see some gains in the nearest future.
    any economy that depends largely on borrowing and debit will eventually collapse,if the economy is not based on real production and industry it will also be so fragile,i was watching cnbc last week and there are some economic analysis that predicting a second financial crisis that will hit us economy due to increasing debit.

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    Rookie martyn's Avatar
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    Yes, I was also surprised by the debt crisis in the United States, why are super great state like that of a sudden have the latest information regarding their debt immense. But I know that the American economic turnaround is very stable and also has a very wide scope internationally, because the currency they use is still popularly used in many countries.

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    As for me, i believe that this will only bring more weakness to the usd and then it's time to leave the usd for a while. The debt is rising for the moment and they need to pay around $55 billion each month while they only got $40 billion each month. Raising debts will only make the usd weaker in the end.

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    Quote Originally Posted by sekiryutei View Post
    As for me, i believe that this will only bring more weakness to the usd and then it's time to leave the usd for a while. The debt is rising for the moment and they need to pay around $55 billion each month while they only got $40 billion each month. Raising debts will only make the usd weaker in the end.
    even though the dollar has been sold of the past month because of this default issue i still do not think that the weakness is too strong as to make much impact on currencies like the euro and australian dolar because of the economic situations in those parts of the world. So i would be very cautious about selling the dollar agianst some currencies.

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    Quote Originally Posted by sekiryutei View Post
    As for me, i believe that this will only bring more weakness to the usd and then it's time to leave the usd for a while. The debt is rising for the moment and they need to pay around $55 billion each month while they only got $40 billion each month. Raising debts will only make the usd weaker in the end.
    But i think every thing in world has solution if we work properly and honesty then there is no way we can not become successful in any thing we want..that's the rumors which mostly spread every 4-5 years in the world every 4-5 years to weakens USD currency but like said before this issue being resolved now and there is no problems now for any one..

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