FOMC Minutes Trigger Dollar Sell-Off

The U.S. Dollar closed lower across the board with no sign of a let-up in this trend. Last week’s mini rally triggered by Bernanke’s comments about a tighter monetary policy have been erased.

The U.S. Dollar closed lower across the board with no sign of a let-up in this trend. Last week’s mini rally triggered by Bernanke’s comments about a tighter monetary policy have been erased.

Today’s FOMC Minutes Report indicated that the Fed was interested in keeping interest rates low and expanding the mortgage buyback program. They cited “the cost of the economy turning out to be weaker than anticipated could be relatively high.” This comment means the Fed doesn’t want to raise rates or end stimulus until they are certain the recovery is sticking. This was basically another way to restate what Bernanke said last week when he commented that the Fed would move toward a tight monetary policy once the economy was on solid ground. The U.S. Dollar spiked lower on the news as some traders have been speculating that the Fed was looking to put an end to its easy money programs.

Intervention by other central banks to control the rise in their currencies may be the only way to combat the fall in the Dollar. The New Zealand, Japanese, Canadian and Euro Zone central banks have expressed the most concerns about the rapid rise in their currencies. Can a concerted intervention be in the offing in the near future to boost the Dollar?

The EUR USD pushed to a new high for the year today. Traders are ignoring weak economic data and instead are focusing on better times ahead. Yesterday’s closing price reversal bottom in the GBP USD was confirmed today. This triggered a surge to the upside which sent the market beyond a normal retracement level at 1.5911 to 1.5959.
The USD JPY survived a serious threat to accelerate to the downside by holding a key retracement area at 89.22 to 88.93. It looks as if buyers were waiting inside of this zone, triggering a late session rally. The Canadian Dollar is also facing the threat of intervention because of its possible effects on the Canadian economy. Yesterday Canadian Prime Minister Harper expressed concern that the rapid rise in the Canadian Dollar would lead to a drop in Canadian exports. Demand for higher yields helped drive up the AUD USD. In addition, this currency received support on speculation of greater growth in China. The NZD USD shrugged off talk of a possible divergence between it and global equity markets and closed in a position to take out the high for the year at .7453.

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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