EUR/USD Broke 1.4 Next Stop 1.33 and Going Lower. Only Obama Can Stop It.

The Reserve Bank of New Zealand cut OCR by 50 basis points to 7.5 percent (link) may have helped pushing Euro down. The RBNZ admitted that inflation is evil, but cutting rate too little too late and causing prolonged recession is equally bad. ECB, are you listening?

As long as you still hear retail ForEx sites chanting COT index, bad US economic outlook, and retail traders desperately trying defend their EUR long positions, you can keep your EUR shorts.

The US economy is bad but as far as the Dollar’s concern, it has seen its worse time. That is until after the election. Nobody know exactly how the next administration is going to deal with the challenging economic issues, but one thing I do know is if corporate tax, upper bracket personal income tax, and capital gain tax increase significantly. I’ll short USD faster than you can say President Obama. I’m simply trying to stay at the right side of a trade, I have nothing against Barack Obama.

According to a USA Today article:

Evidence of legal tax-shifting can be seen in government statistics. In 2005, U.S. multinationals’ units in Ireland, which levies a corporate tax of just 12.5%, reported profits that were twice as large as the profits of all U.S. affiliates in Germany, France and Italy combined. Viewed another way, each employee of a U.S. multinational in Ireland was worth more than $539,000 in profits, while their counterparts in Germany brought in about $16,000, according to the BEA.

Multinationals realized much bigger profits in lower corporate tax counties than higher tax ones. Also the recent UBS tax evasion case proves that rich people are hiding their money offshore. The reason is simple. Rich people and profitable multinational companies can and will find ways to move their income or profit elsewhere when the incentive is high enough.

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One Response

  1. I must say this is a great article i enjoyed reading it keep the good work 🙂

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