Talk of “QE2 Light” Boosts U.S. Dollar

The U.S. Dollar is trading higher across the board thismorning after a Wall Street Journal article suggested the Fed “may opt for amore measured dose of QE this time around rather than the shock-and-awe versionwhich characterized QE1”.

The U.S. Dollar is trading higher across the board thismorning after a Wall Street Journal article suggested the Fed “may opt for amore measured dose of QE this time around rather than the shock-and-awe versionwhich characterized QE1”.

Traders are paring long positions against the Greenback asthey seem to believe that the Fed is giving in to some G20 criticism regardingtheir aggressively expansionary monetary policy. A few G20 members believe thatthe Fed’s aggressive spending has been driving up assets in the past, but thattoday’s global economic conditions warrant a more conservative approach tostimulating the economy.

The article goes on to further state that the Fed is likelyto purchase a few hundred billion dollars of Treasury Bonds rather that theprevious estimate of $1 trillion. Thisspeculation is leading investors who aggressively shorted the Dollar to lightenup on their positions, triggering a short-covering rally in the Greenback.

Technically, this morning’s sell-off in the EUR USD hashelped form a potentially bearish secondary lower top at 1.4080. Since the maintrend turned down two weeks ago, traders had been looking for a place to shorton the next rally.

Downside momentum is building that could drive this marketthrough the last swing bottom at 1.3698, further weakening the market. Theeventual downside target of 50% of the rally from 1.2587 to 1.4259 to 1.3373 islikely to be reached over the short run if current volatility persists.

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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