Dollar Falls; Speculators Looking for More Fed Quantitative Easing

The U.S. Dollar Index fell to a 10-Month low overnight amid speculation the Federal Reserve will take additional steps to prevent the faltering U.S. recovery from completely derailing.

The U.S. Dollar Index fell to a 10-Month low overnight amid speculation the Federal Reserve will take additional steps to prevent the faltering U.S. recovery from completely derailing.

The Dollar is under pressure against all major currencies before a report this morning was expected to show the Institute for Supply Management’s U.S. manufacturing gauge slowed and as Fitch Rating raised its growth forecast for Europe. Improvements in Chinese manufacturing helped boost Asian currencies.

The main force driving the Dollar lower is the prospect of more quantitative easing by the Fed. This is pushing the Dollar down against a large number of currencies. Oversold technical factors may slow down the rate of the Greenback’s decline, but any counter-trend action is likely to be short-lived.

Technically, the Cash Dollar Index negated Thursday’s closing price reversal bottom when it took out that price overnight. This index is now trading at its lowest level since January 2010 and getting dangerously close to a major bottom from December 2009.

The EUR USD rallied overnight, moving the market closer to a major
Fibonacci retracement level at 1.3763. Watch for a technical bounce triggered by profit-taking after the first test of this level. The uptrend is expected to remain intact unless the 50% level at 1.3510 is violated.

The GBP USD is trading higher after failing to confirm its second closing price reversal of the week. These reversals indicate that the longs are nervous, but there are not enough fresh shorts to push this market lower. On the upside, this market may breakout over a
downtrending Gann angle at 1.5897.  Uptrending Gann angle support is at 1.5656.

The USD JPY continues to walk down a
Gann angle at 85.91. The weakening U.S. economy is the biggest bearish factor driving this market lower. The market continues to creep closer to the intervention bottom at 82.88. Traders don’t seem to be too worried this time about another round of intervention ahead of next week’s Bank of Japan meeting.

The Australian Dollar failed to confirm Thursday’s reversal top . A trade through .9733 will negate the potentially bearish pattern. If this pair fails to negate the pattern, then watch for a break through .9628 to confirm the top. Improvements in China manufacturing is helping to underpin the Aussie.




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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