Barack Obama in China - Will US Dollar (USD) Stop Going Down very soon?!

Barack Obama Asian trip which is the most important events of the week and was started 4 days ago from Tokyo and continued with attending APEC members meeting in Singapore, now has reached its main stage in Beijing. Obama’s strategy in China that is completely different from the previous American presidents is the most significant aspect of this event. In spite of America’s $1000 billion debt to China, George Bush never wanted to know and treat China as a big and strong economic power in the world. However, Barack Obama not only had a completely different behavior, but from the beginning of his trip, he has emphasized all the time that he is so interested in more development and progress of China and also all other Asian developing countries.

Yesterday, Barack Obama had several meetings with China’s president, Hu Jintao, and he really treated Hu Jintao as the president of a big economic power in the world. Although no details are published about Obama’s meeting with Hu Jintao, according to diplomatic resources of China, there is no doubt that Hu Jintao has complained  to Obama about a few important things. One of them is the increasing amount of U.S. Budget Deficit that hit record $438 billion for year and so the US excessive debt volume to China. The other thing is the last US government decision about applying custom tax on some of Chinese products like automobile tires or some steel industry products, to support the US industry. From the China government point of view, these decisions are against the liberal economic criteria and also the World Trade Organization rules. One of the other things that Hu Jintao may have complained about, is the USD low and decreasing value. US dollar is 2/3 of China’s foreign currency reserves including all the investments that China has in US. With 2 trillion and 270 billion dollar foreign currency reserves, China is the biggest US creditor. So it makes sense that China to be worried about the volume of the money that US owes them.

So what will happen to USD? Will it keep on going down or Obama will change its direction when he goes back to US?
(please read this article too: EUR/USD Rally - Who Wants Euro to Go Up Against USD?)

Lets take a look at the charts and see how they look like.

This is EUR-USD monthly chart. As you see there is a support line that has already been broken and it is working as a resistance line now. EUR-USD is retesting the broken support line. Lets have a closer look and see if EUR-USD has reacted to this line so far or not.

This is the same chart, but with a higher magnification. As you see the last month candlestick (October) reacted to this line strongly. It had almost broken above the line but suddenly went down and closed below it. This month candlestick is also doing the same. If USD value keeps on going down, EUR-USD may break above the line and then this line will act as a support again. On the other hand, based on Obama’s negotiations with China, it is possible that they stop the USD value from going down and push it a little up to please China. If so, EUR-USD will stay below the broken resistance line. Let see!

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