EUR USD Soars to Six-Month High; Speculators Betting on Fed Easing

The EUR USD soared this morning, hitting anew-six month high, as a report indicating brewing weakness in the U.S.manufacturing sector supported speculators betting on additional quantitativeeasing by the Federal Reserve. 

The EUR USD soared this morning, hitting anew-six month high, as a report indicating brewing weakness in the U.S.manufacturing sector supported speculators betting on additional quantitativeeasing by the Federal Reserve. Tradershave been driving the Euro higher on the thought that the Fed will have toresume large-scale purchases of Treasury Bonds in an effort to provideliquidity to the economy to keep the recovery from derailing.

The Dollar has been under relentlesspressure since the Federal Open Market Committee meeting several weeks ago. Atthis meeting the Fed hinted strongly about resuming its asset-buyback program,also known as quantitative easing. As long as QE remains on the table no onewants to hold Dollars.

This morning, the Institute for SupplyManagement’s Index of U.S. manufacturing activity fell to 54.4 in Septemberfrom 56.3 in August. The number was not low enough to warrant fear of adouble-dip recession, but not strong enough for the Fed to remove the threat ofFed QE.

The Greenback remained under pressure mostof the day even though the Reuters/University of Michigan’s Final Consumer Sentiment report wasrevised upward to 68.2 from 66.6 and U.S. Consumer Spending rose to 0.4% inAugust, while incomes rose 0.5%.

Euro traders also shrugged off a reportconfirming a slowdown in the pace of manufacturing growth and an elevatedregional unemployment rate of 10.1% in August.

This meant that traders are more concernedabout the prospects of fresh QE by the Fed than a slowdown in the Euro Zoneeconomy.

Technically, the Euro remains on pace to reach amajor Fibonacci Retracement Level at 1.3896. There may be a technical bouncebecause of profit-taking at this level, but the trend should remain strongunless the 50% level at 1.3510 is violated.

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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