U.S. Dollar Continues to Lose Ground to Euro

Favorable debt auctions in Spain and Ireland lit the initial fire this morning in the EUR USD, but this morning’s rally is being underpinned by speculation of another round of quantitative easing by the Federal Reserve.

Favorable debt auctions in Spain and Ireland lit the initial fire this morning in the EUR USD, but this morning’s rally is being underpinned by speculation of another round of quantitative easing by the Federal Reserve.

Although the Federal Open Market Committee is expected to leave interest rates unchanged, there is growing speculation today that it will hint at increasing its Treasury Bond purchases to help get the weakening U.S. economy back on track.

The stronger Euro reflects the growing sentiment that the Euro Zone economy is recovering faster than the U.S. economy. An increase in QE by the Fed will be a strong indication that the FOMC believes the same. Furthermore, more QE will keep pressure on U.S. interest rates, while a faster recovery in Europe will bring that economy closer to an interest rate hike. Investors will look to invest in the higher yielding currency.

Technically, the EUR USD is trading firmer today, hovering near last week’s high at 1.3159. The charts indicate that further strength could take the Euro up to a downtrending Gann angle at 1.3174.

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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