U.S. Dollar Hits 15-Month Low on Prospect of Lower Interest Rates

The U.S. Dollar hit a 15-month low against a basket of currencies last night on the prospect the Fed will keep interest rates at low levels for a prolonged period of time.

The U.S. Dollar hit a 15-month low against a basket of currencies last night on the prospect the Fed will keep interest rates at low levels for a prolonged period of time. This assumption is based on last week’s Fed FOMC statement and recent comments from a Fed official suggesting that unemployment is the major concern. This serves as a hint that the Fed is not likely to begin hiking rates until the U.S. jobs issue begins to post a recovery. The Dollar is trading weaker on this news versus all major currencies except the Japanese Yen and British Pound.

Excessive volatility hit the GBP USD early this morning following the release of the Bank of England’s forecast for economic growth and inflation. In the report, the BoE warned that the U.K.’s economic recovery was just beginning and continuing strength during the recovery period remains “highly uncertain”.

In other news, China announced a major departure in how it determines the value of its currency the Yuan. In a statement on Wednesday, China said it will consider using the valuations of major currencies in guiding the price of the Yuan. This statement suggests that China will begin to move away from using the Dollar as a peg. This practice has been followed since the middle of 2008.

China’s factory growth output soared to a 19th-month high in October. This was a sign that financial stimulus helped improve the domestic economy. A drop in imports and exports indicated that the economy is still suffering from the global economic recession. This drop in imports and exports may have a major effect on its trading partners but most of all on Australia and New Zealand. This news is contributing to the weakness in the AUD USD this morning.

Higher equity, crude oil and gold prices are helping to pressure the USD CAD. The charts indicate that the first and second downside objectives were reached last night at 1.0522 and 1.0446. Further weakness should take this market to uptrending Gann angle support at 1.0395.

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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