Short-Covering Ahead of Fed Minutes Driving Greenback Higher

The U.S. Dollar is trading higher against most majorcurrencies this morning. Short-covering ahead of the release of today’s FedMinutes is the catalyst behind the rally.

The U.S. Dollar is trading higher against most majorcurrencies this morning. Short-covering ahead of the release of today’s FedMinutes is the catalyst behind the rally.

The Fed Minutes, scheduled to be released at 1 p.m. Centraltime, will be watched closely by traders for an indication of how close theFederal Open Market Committee is to implementing another round of quantitativeeasing when it meets on November 3. The U.S. Dollar has been under tremendousselling pressure since the last Fed meeting on September 21 when it hintedstrongly at increasing its balance sheet.

Recently the Greenback has shown signs of bottoming.Currency traders are certain the Fed will begin easing soon. What the market istrying to do now is price in the correct size of the asset purchase. Tradershave priced in the possibility of more than $1 trillion of additional easing.Today’s minutes could move the markets if the report shows any sizeabledeviation from this amount. Falling short of $1 trillion is likely to triggermore short-covering. Hints that the QE package may be substantially more than$1 trillion could trigger another strong sell-off in the U.S. Dollar.

Comments from Fed member Janet Yellen are also contributingto the Dollar’s strength. Yellen was quoted on Monday as saying that the Fed’scurrent loose monetary policy has helped spawn an excessive risk-takingenvironment. Some traders feel that Yellen may resist the FOMC’s attempt tofurther ease, but others feel that despite her pertinacity to be a dove, sheseldom votes against the majority.

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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