Dollar Index Reaches 15 Month Low on Massive Selling Pressure
The U.S. Dollar Index reached a 15 month low on Monday
following a massive sell-off against most major currencies.The Dollar has gone down since November 3
when it topped at a 50% price at 77.50.The 2008 bottoms at 73.79 and 73.67 are the next downside targets.
The U.S. Dollar was trounced on Monday after the G-20
finance ministers failed to discuss the value of the Dollar at their week-end
meeting, thereby, effectively offering no support.In addition, they decided to keep stimulus
measures in place until the global economy can show sustained gains.
The real selling pressure hit the Dollar after an IMF report
issued at the meeting said, the Dollar has moved closer to â€śmedium-term
equilibriumâ€ť but â€śstill remains on the strong side.â€ťThis statement was a shot at the Dollar being
overvalued versus the Asian currencies particularly the Chinese Yuan.Aggressive traders seized this moment as an
opportunity to increase selling pressure on the Dollar overnight and throughout
the New York
The fact that the G-20 Finance Ministers failed to talk up
the U.S. currency came a few days after the Federal Reserve voted to leave
interest rates at historically low levels, and it was reported the U.S. lost
more jobs while boosting the jobless rate to a 26-year high. All of this added
up to a perfect storm versus the Dollar.The Fed decision itself added up to a free ride for the Dollar bears
until the Fed meets in December.With
interest rates at historically low levels and plenty of liquidity available,
traders should continue to treat the Dollar as the worldâ€™s funding currency
throughout the foreseeable future.
Higher than expected German Industrial Production in
September helped boost the EUR USD along with the G-20 news. The Euro chart
indicates the main trend is up and within striking distance of the October high
The November 3rd CFTC Commitment of Traders Report on
British Pound futures, showed a major reduction in the number of short
contracts. This is a sign that traders are shifting back toward demanding
higher risk assets.It is also a sign
that traders may believe the U.K.
economy is stabilizing.Overnight the
GBP USD took out the October high at 1.6691 and rallied higher during the New York session before
backing off near the close.It now
appears ready to challenge the July top at 1.7042.
Global demand for higher yielding currencies kept pressure
on the U.S. Dollar and Japanese Yen for most of the day before the USD JPY was
able to post a small gain.Fundamentally, the Yen should gain on the Dollar because Japan
still maintains a slight interest rate advantage.Technically, the USD JPY traded inside of a
retracement zone at 90.15 to 89.64 for most of the day.
Demand for higher yielding currencies pressured the USD CHF
throughout the New York
trading session.Last week the main
trend turned down in this market.With
downside momentum building, donâ€™t be surprised if this pair returns to the low
for the year at 1.0032.
Last weekâ€™s bearish Canadian unemployment report helped slow
down the decline in the USD CAD early in the trading session before succumbing
to selling pressure as the day wore on. The market accelerated to the downside
when last weekâ€™s low at 1.0592 was violated. The main objective of this
sell-off is 1.0522.
The AUD USD finished sharply higher. This rally was a
continuation of last weekâ€™s late surge which was triggered by bullish comments
from the Reserve Bank of Australia.The RBA increased its estimate for GDP while
sending the market a signal that interest rates would likely continue to
rise.Todayâ€™s rally was all about
increased demand for higher yielding currencies.The charts indicate that .9329 is the next
upside target while support moves up to .9105.
Appetite for risk helped drive the NZD USD through a
resistance cluster at .7358 to .7375. The high for the day stopped at a .618
retracement level at .7423.The chart
pattern suggests that a violation of this price could trigger an even further
rally to a downtrending Gann angle at .7505.
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