U.S. Federal Reserve's overstretched policy of keeping interest rates at an ultra low level will harm the liquidity of the U.S. banking system and result in the U.S. dollar losing its charm.

Highlights
The U.S. unemployment rate rose from 9.8 to 10.2 percent in October, according to a recent report from the state Bureau of Labor Statistics. It was the first time the country's level of unemployment surpassed 10 percent in 26 years. Most analysts earlier forecasted a lesser increase of 9.9 percent.
Nonfarm payroll employment continued to decline by 190,000 in October, the smallest decline since August 2008. The largest job losses over the month, however, were mostly in construction, manufacturing, and retail trade.
The report reinforced speculation that the U.S. Federal Reserve will maintain interest rates at their current near-zero range into late next year.

Since the start of the recession in December 2007, unemployment levels have risen by 8.2 million, and the unemployment rate has grown by 5.3 percentage points.

Perry Li, a senior analyst at Forex Signs, said the U.S. Federal Reserve's overstretched policy of keeping interest rates at an ultra low level will harm the liquidity of the U.S. banking system and result in the U.S. dollar losing its charm. However, it's out of the question that the U.S. Federal Reserve will let the U.S. banking system collapse so a surprise interest rate hike is possible.
Currency Market Analysis

Australian dollar vs. U.S. dollar

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The Australian dollar is expected to hit a new high against the U.S. dollar this week, challenging 0.9320. Perry Li, a senior analyst at Forex Signs Inc., thinks investors could safely buy Australian dollars above 0.9320. The support point would be 0.8900.
U.S. dollar vs. Swiss franc

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The rebound of the U.S. dollar against the Swiss franc was hampered by the disappointing unemployment figures released in the U.S. last week. Investors should prepare to sell U.S. dollars for the short term and set up their stop loss at 0.9960.


This Week's Events

- 8th China Financial Markets Conference will be held on Monday.
- U.S. stock markets will be closed on Wednesday.