EUR/USD Selloff Ahead? Yes, But the Trump Trade Has Already Lost the Euro $1 Trillion, And the US Dollar a Huge Wipeout. The American Economic Meltdown May Is Just A Taste of What’s to Come for Both Forex Traders & Consumers. The New York Times recently featured an article by Jesse Livermore titled “The Trump Trade – How the US Dollar Will Break Under The Trump Presidency”, in which he stated that a “tectonic shift” is coming.
This crisis that’s currently taking place within the U.S. Dollar is called “The Trump Trade.” It involves an economic system whereby major U.S. Corporations that export jobs offshore are receiving huge bonuses from their European Union based Corporate Partners. These European Corporations are known as “passporting” corporations. They have no real “home” country of residence, they simply “transition” between countries using their “passport.” The main purpose of these corporations is to avoid paying taxes to the country of their origin, and therefore have a significant tax advantage.
This means that they’re getting massive tax breaks from their European Corporate Partners (E.C.P.) In return, they send thousands of low wage workers (and their families) across the pond to work for them in the U.S., because they can save money by shipping their goods to the U.S. instead of selling them locally in their own country. They also don’t need to pay taxes on their profits received in the U.S.
Because these E.C.P. corporations are shipping their goods to the USA (instead of selling them locally in their own country), there’s a significant benefit to the U.S. economy. The E.C.P. corporations that benefit the most include the likes of Ford, Caterpillar, General Motors, Wal-Mart, Verizon, BP, Shell and many more.
Many of these corporations are now starting to feel the pinch from this shift in the U.S. economic system, as the cost of their products is increasing dramatically in Europe due to the weak euro, combined with the collapse of the Euro. It’s important to remember that the European economy is largely driven by consumer demand. With the U.S. economy in such a state, consumers’ spending power has significantly reduced. When consumers see lower dollar spending power, they’ll naturally increase their spending in other countries.
However, when they see the stronger dollar (which includes more economic benefits), they’ll begin to reduce their purchases of goods and services to the E.C.P. corporations who do not face the same difficulties as them. This will consequently force their E.C.P. to cut prices to make their products available to their customers, which can cause the price of their products to fall in the U.S.
The E.C.P. has already begun to do this, as it is currently trying to pass on lower pricing to the consumer in the U.S. through its lower price policy to its E.U. Corporate Partners. If the U.S. continues on this path, there’s no telling what the downward economic spiral could result in for us.
There is certainly an opening for a correction in the U.S. Dollar, but what happens if the correction comes after the correction? What if the correction is too much and the currency doesn’t recover its lost value?
Well, the currency markets know this and they’ll act accordingly. This is why they’ve become such a good indicator of what is to come in the stock market in the coming days, weeks and months.
If the U.S. stock market moves down, the EUR/USD will also move downward. If it moves upward, the USD will move upward. The reason for this is that traders know that the EUR/USD is the “hot currency” (USD/JPY) and therefore the USD is expected to appreciate against it as well. Since we have a very high unemployment rate in the U.S., the EUR/USD tends to appreciate versus the dollar.
Therefore, when the U.S. suffers its economic correction, the EUR/USD will be affected as well. This is the only time that the EUR/USD will appreciate as a result of such a correction, and this will give you a great indicator of what’s about to happen in the U.S. stock market.