US Dollar exchange rate battles the Euro and Pound again

Foreign Exchange - Currency Outlook

The third week of every month is stuffed full of economic data. See the US calendar below. You can get a pretty good global economic calendar. This time, we also have major institutional changes to contend with, too, not to mention the abiding question of how the market will like the Treasury’s new $104 billion in debt issuance this week.

We live in perpetual fear of a failed auction - that the Treasury will hold a party and no one will come.

As for "announcement effects," Market News writes that "No one expects the Fed to expand its quantitative easing program beyond the maximum $1.75 billion already announced for potential purchases of Treasuries, Agencies and Agency mortgage-backed securities." The Fed might, however, alter the composition, or make a statement that it’s not targeting specific interest rate levels, or some other minor change.

As for overall risk aversion, the Foreign exchange market is dependent on equities and commodities. If they fall for whatever reason, the us dollar rate immediately gets the benefit. It may be tiresome to keep reminding, but remember that these intermarket correlations are unreliable. They are strongest when conditions are panicky and uncertainty is high, but they tend to fall apart when one group gets a grip. Part of the current problem is that Foreign Exchange volumes have been low of late. This raises the opportunity for a single player to have undue influence.

We are always skeptical when the dollar exchange rate looks strong, since the bias against the dollar is a long-lasting, deep and powerful one, if not entirely rational sometimes. See the "dueling channels" on the charts. Either interpretation (Buy us dollars or sell us dollars) is equally plausible. On the whole, a healthy dose of skepticism about green shoots is justified.

Whether fear “should” rise to the level of a dollar rally, however, is in question.

We would like to see more attention paid to the German deficit issue. Some foreign exchange analysts say a crisis is brewing in euroland. This is not the universal perception but if it were to get a grip, we’d have real risk aversion and a really good reason for dollar recovery, since US institutions are in better shape or at least at less risk. Watch for the euro to surpass 1.3750. If it does, we can expect 1.3420 or so.

Pounds to US Dollars = 1.6330
Pounds to Euros = 1.1784
Euro to Pounds = 0.8489
Pounds to Australian Dollars = 2.0800

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790