Why are time horizons important ?
Different traders can have differing views on a trade depending on their time horizons. When discussing the Euro/$ exchange rate, for example, it’s important to realise that there are various factors at work, some short term and some longer term in their nature. How you view the rate really depends on your time horizon …. The medium/longer term view is that for structural reasons the dollar is likley to depreciate vs the Euro – mainly because of the deficit the US runs versus the rest of the world. I don’t know one economist who doubts that the dollar should weaken over time as it will take a long while before this deficit problem disappears. Put simply, US imports are likely to outweigh US exports for the forseeable future and to ‘finance’ this deficit it’s not unreasonable to expect a lower dollar over time. However, as we know markets don’t go in one direction the whole time. I’ve been a seller of the Euro ever since it failed to break and hold the 1.1625/35 zone on 25th June ( th
