Watch for these strategies in the months ahead.
- They’ll play dollar-bullish economic releases. “Do the intervention on a day when the economic releases favour a stronger US Dollar.”
- They’ll smack sudden dollar weakness. “Do the intervention when traders are overconfident, and pressing their bearish dollar bets too aggressively. Catch them leaning the wrong way.”
- They’ll come in force. “Don’t do it alone. You will fail. You must get the central banks of most of your major trading partners to go along to create an impression of unanimity.”
- They’ll carry a big stick. “Do it BIG. This is not a time to hold back; either do it BIG, or don’t do it at all. You want the currency traders to wish they had never taken up the profession.”
Aleph Blog: You want to have at least three of these in play for an effective intervention. You want to create a genuine panic that feeds on itself, leading everyone to readjust their positions on the US Dollar, pushing it up, and winning the psychological battle against a lower US Dollar.