Wednesday November 17, 2004 - 14:37:39 GMT
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On the big picture
Without saying that next year EUR/$ can't trade at 1.35 or 1.40, I think we must keep things in perspective. I wrote on Tuesday on TT that $/DEM lost 62% of its value when it hit 1.34 from 3.48 in 1985. However, during the first 3-4 years we had a very steep decline from 3.48 to 1.56which was a 52% devaluation. The rest of the move took much longer and the absolute bottom was seen in 1995 i.e. 10 years after the start of the decline and at that point we had a 62% devaluation. Coming now to the present picture, EUR/$ has already appreviated by almost 58% in 4 years. I am not implying that we need another 6 years but even here at this point the USD has lost from its best levels seen in 2000 almost what had lost in 10 years back then. This may not be a trading idea, but at least calls for caution when setting targets in levels and time.
Of course my argument was mucg stronger in January/February this year when I first discussed this poimt given that it was almost one year earlier and the same levels then were relatively much more exaggerated timewise than they are now, but even so the very long term picture doesn't change too much.
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