RUMOURS OF A DEAL involving the US delaying the report or not naming China as manipulator IN EXCHANGE for China either revaluing the yuan or allowing it to appreciate faster. As part of any deal, CHINA WOULD NEED THE FED TO ISSUE LESS QE (purchase less treasuries) in order to alleviate the downward spiral of the USD. These talks are a strong reason to the consolidation seen in Thursday/ Friday FX markets involving USD bounce and yen decline
The Fed is expected to pump vast quantities of freshly printed dollars into the money markets, in a bid to lower long-term Treasury yields lower. The markets have already discounted the probability of at least $500-billion of QE-2 injections. On the surface, the Fed’s propaganda artists say they aim to prevent a deflationary collapse and stave off a “double-dip” recession. However, clandestinely, the Fed is monetizing the federal government’s debt and is prepared to buy the Treasury notes that Beijing decides to dump should a full scale Chinese-US trade war erupt.
So far, however, the ECB has limited its purchases of distressed sovereign bonds to 60-billion euros, and these purchases were largely sterilized, thus helping the euro to rebound to $1.400 last week.
Also helping the euro to rebound sharply versus the US$, was the frequent drumbeat of implied threats by the Fed to unleash QE-2, and public calls of support for the euro by China’s premier Wen Jiaboa
A further rise in the eruo’s value against the Chinese yuan and the US-dollar could further undermine global demand for the eurozone’s industrial exports, which prompted the eurozone’s finance chief Jean-Claude Juncker to warn on October 8th, “The euro is too strong today,” as it crossed $1.400, ahead of a meeting of finance ministers and central bankers of the G-7 clique
Behind the scenes, the Fed engineered the euro’s recovery by submerging the yield on the US-Treasury’s 5-year note below Germany’s 5-year bund yields. So far, the ECB has refused to intervene to halt the euro’s rally. The ECB is skeptical in principle of interventions, - buying and selling currencies to affect exchange rates. However, if the Fed signals a larger than expected blast of QE-2 in November, the euro could climb higher, and complaints from eurozone industrialists would follow. At that point, the ECB might cast aside its principles, and begin printing euros and start buying bonds denominated in foreign currencies.
Euro – The single currency lost some ground on Friday after Federal Reserve Bank of Minneapolis President Narayana Kocherlakota offered the notion that further quantitative easing might have a muted impact than anticipated. Ahead of Friday’s more important U.S. events the euro has slipped to $1.4076 having reached $1.4113 earlier in the day. Christian Noyer of the ECB’s governing council noted on Friday that governments and central bankers need to find a way of solution to the disorderly nature of currency movements.
the Federal Reserve remains committed to pursuing policies that promote our dual objectives of maximum employment and price stability. In particular, the FOMC is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation over time to levels consistent with our mandate.
in the past few weeks, entirely driven by QE2 expectations. The expectations are so high that inflation is finally being priced in (see 30-yr bonds, commodities, and gold), and Bernanke would have to do it even if he had a change of religion tonight, or else. The only question is when and how much. While I don't know the answer, I'm sure it lies somewhere between a dog and a fire hydrant. If QE2 is not big enough to cause another 10% drop in the dollar index, it'll snap back 10% along with equities/gold/commodities crashing through a significant correction. If it is big enough to meet the markets' insane expectations, it will most likely kick the currency war into full speed and start the sequence that leads to the dollar's death as the international reserve currency.
In countries where there is a huge deficit the only solution to pay back debts is through a devalued currency. Japan has recently intervened to try to devalue the strengthening yen. A strengthening currency to countries with huge obligations can heighten the risk of default which many countries are facing. Also, a strong currency puts pressure on international corporations who export products abroad. A weak dollar will cause the products to be more expensive to American consumers which will hurt demand and growth. More sovereign debt defaults in emerging markets are expected. It appears that from the European Debt Crisis that many investors ran to the dollar from the Euro. I expect something similar to occur now. The Euro is overbought and the U.S. dollar is reaching long term support. The Euro is reaching a key resistance level and is overbought. This means a pullback should occur. The U.S. Dollar is extremely oversold and at long term support. The bearish sentiment on the U.S. Dollar is extremely bearish which indicates a reversal should occur.
the investment community is expecting too much from the Fed and it appears the Fed is doing an excellent job stimulating the markets just through speculation of a move rather than the actual move itself.
This last easing from the Fed has met with some more critics and it has definitely increased international tensions. The U.S. dollar has collapsed and is now testing long term support.
. If QE2 is not big enough to cause another 10% drop in the dollar index, it'll snap back 10% along with equities/gold/commodities crashing through a significant correction. If it is big enough to meet the markets' insane expectations, it will most likely kick the currency war into full speed and start the sequence that leads to the dollar's death as the international reserve
currency.
The Euro is overbought and the U.S. dollar is reaching long term support. The Euro is reaching a key resistance level and is overbought. This means a pullback should occur. The U.S. Dollar is extremely oversold and at long term support. The bearish sentiment on the U.S. Dollar is extremely bearish which indicates a reversal should occur.
Technically the dollar is due for a bounce ,and investors should look for any pullbacks in gold and silver as a buy point.
Instead of the risk associated with buying bullion at these extended prices, many juniors who would be extremely profitable at lower gold and silver prices have not broken out yet.
Euro/Usd H4 Chart
On the Daily Chart, we observe that a possible Top may have been stamped near 1.4155, which is not 100% Confirmed. Wave Being marked 5 is near 1.4250, which may have been prematurely attained at. This currency pair may now reverse to the next level near 1.3555 (61.8% Fibo Retr)
The fact that Euro/Usd could not sustain at 1.4000 on last Friday Close may signal a reversal from that point,
On the H4 Chart with Ichimoku,we do note that 1.3880 is the Ichimoku Cloud Top support
(Which is also quite near the 1.3865 , being the 23.6% Fibo Retr). , Breaching this important Support will expose this currency pair toward 1.3790 (also near the 0.00% Fibo Retr.) , Follows by 1.3580.( All indicators are showing Bearing Sentiments near term)
