The Federal Reserve stepped into the Treasury market on Monday to bid prices higher, in an effort to reduce yields and increase liquidity in the lending market. The moves were part of the open market operations that have been put in place to release the huge amount of dollar based bills and notes that have been hoarded by financial institutions concerned about balance sheet write-downs and redemptions.
The net effect was to lower the value of the Usd against the major pairs, something that lower equity and oil markets tried to negate. The loser was the dollar, on a day that otherwise would have very likely seen the major pairs struggle to hold par against the greenback. The fact that the market had a quarter of its regular volume flow, because of the European and Canadian markets being closed, probably allowed the dollar to more easily find lower bids than otherwise would have been the case.
The major pairs have now found some four hour swing point areas, and will likely take their lead from the afternoon equity trade on Wall Street said TheLFB-Forex.com Trade Team members. Most will be looking to see a reversal of the equity selling if the majors are going to hold these levels going into the 17:00 EDT forex close. The euro and swissy are battling their 20 day SMA areas at 1.3380 and 1.1380, the yen is battling 100.00, and the aussie and cable are trying to build on their newly formed four hour buy signals, that really will need the whole market to join the dollar selling if they are to make the next leg up towards 0.7500 and 1.5000.
It sets up great potential in the Asian session, and in a week of red flagged economic calendar releases really has lit a fuse under the dollar they said. The response is as yet unknown, but there will be no grumbling from the Fed in regard to a lower value dollar, something that the Bank of England, ECB, Swiss National Bank, and the RBA may have something to say about.