Friday October 1, 2010 - 21:03:44 GMT
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EUR USD Soars to Six-Month High; Speculators Betting on Fed Easing
The EUR USD soared this morning, hitting a
new-six month high, as a report indicating brewing weakness in the U.S.
manufacturing sector supported speculators betting on additional quantitative
easing by the Federal Reserve. Traders
have been driving the Euro higher on the thought that the Fed will have to
resume large-scale purchases of Treasury Bonds in an effort to provide
liquidity to the economy to keep the recovery from derailing.
The Dollar has been under relentless
pressure since the Federal Open Market Committee meeting several weeks ago. At
this meeting the Fed hinted strongly about resuming its asset-buyback program,
also known as quantitative easing. As long as QE remains on the table no one
wants to hold Dollars.
This morning, the Institute for Supply
Managementâ€™s Index of U.S. manufacturing activity fell to 54.4 in September
from 56.3 in August. The number was not low enough to warrant fear of a
double-dip recession, but not strong enough for the Fed to remove the threat of
The Greenback remained under pressure most
of the day even though the
Reuters/University of Michiganâ€™s Final Consumer Sentiment report was
revised upward to 68.2 from 66.6 and U.S. Consumer Spending rose to 0.4% in
August, while incomes rose 0.5%.
Euro traders also shrugged off a report
confirming a slowdown in the pace of manufacturing growth and an elevated
regional unemployment rate of 10.1% in August.
This meant that traders are more concerned
about the prospects of fresh QE by the Fed than a slowdown in the Euro Zone
Technically, the Euro remains on pace to reach a
major Fibonacci Retracement Level at 1.3896. There may be a technical bounce
because of profit-taking at this level, but the trend should remain strong
unless the 50% level at 1.3510 is violated.
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