Fresh Liquidity Driving Greenback Lower

This morning the Dollar is getting pounded once again.Simply stated, new liquidity means a weaker Dollar. With the exception of theDecember Japanese Yen, the Greenback is trading weaker across the board.

This morning the Dollar is getting pounded once again.Simply stated, new liquidity means a weaker Dollar. With the exception of theDecember Japanese Yen, the Greenback is trading weaker across the board.

Traders are buying the December Euro and December BritishPound for economic reasons. The European Central Bank is consideringwithdrawing stimulus while the U.S. Federal Reserve is adding liquidity. Thisscenario favors a long Euro. The U.K.economy seems to have stabilized and it seems to have absorbed the recent newausterity measures and tax hikes.

The fresh money pumped into the system from the Fed isflowing into stocks and helping to boost Dollar priced commodities. This isdriving up demand for risky currencies such as the December Canadian Dollar andDecember Australian Dollar. Although the Bank of Canada recently refrained fromhiking interest rates, the huge amount of natural resources this country holdsis helping to support the currency. Higher gold and crude oil is translatinginto support for the Loonie. Earlierthis week, the Reserve Bank of Australiaraised its benchmark interest rate, increasing the interest rate differentialbetween the U.S. and Australia,making this currency an attractive buy as investors chase the higher yield.

Today looks like a lesson in Forex 101 as new liquidity hasbreathed fresh life into the Dollar’s downtrend. Traders are chasing the higheryields that the U.S.can’t deliver at this time.

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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