I suggest the EUR/USD is out of touch with relative rates, funding needs, and relative dynamics of the economies.
Four Reasons to be Bullish on the US Dollar:
- The EU debt crisis – when ECB becomes lender-of-last-resort we will see 10 figure move lower.
- Relative growth differences – The US is more dynamic and with only “one master” . – i.e. Congress vs. Europeans 27 members and lacking fiscal union.
- Competitiveness. US will able to compete on labor costs with close to 20% real unemployment and incoming tax incentives.
- HIA – Homeland investment Act – as stated above the Super Committee is trying to get a reduced tax of 5.25% in place.
My bullishness is relative, but the biggest contributors to long-term wealth tends to be your choice of currency. I have a target of 100 in DXY for next year, so a 25% rise in the US dollar during 2012 – and in EURUSD terms the expected move is changed range from 1.30/1.40 now to 1.20/1.30 on ECB rolling over, another 5-6 figures on interest rates, and then HIA II we end around 1.10-1.15 for 2012 end target.
Source: Mish’s Global EconomicAnalysis