The dollar continues to fall nonstop, what with EUR/USD and GBP/USD breaking important resistance levels of 1.35 and 1.43 respectively! One would say that investors cannot wait to get rid of their dollars, who they have bought in the last few months due to risk aversion! So far, March has been a very not dollar friendly month and this is likely to continue for a few days! Is this a simple correction of the big downside we witnessed these last few weeks? Or is there more to it?
The EUR/USD is trading heavily since yesterdays FOMC announcements and hasnt stopped to breath. The pair broke important 1.35 very easily and also 1.36. Now it is trading above 1.37 and it looks like 1.38 is the next target! The whole move is happening very fast and it makes one wonder as to how easy is to be sustained! As long as the pair does not fall below 1.35, which works as a good support now, there may be further gains ahead! For now, 1.38-1.3860 is likely the targets for the coming hours!
The economic calendar today had a few economic releases, with jobless claims again printing a very high number over 600.000 and Philly Fed Manufacturing Index coming out slightly better than expected but nothing worth reacting to! All market participants, have ignored today's data as eyes and ears now are all turned to FED and its new decision to buy $300B in US Treasuries in order to boost the economy. Yesterday, New York closed positively and with traders taking the news in a good way, however come today and investors are not convinced how this ï¿½ï¿½cunning planï¿½ï¿½ could solve the current economic mess! FEDï¿½ï¿½s actions seem desperate to market participants and desperation is not liked as it shows that the US government has not really got a clue as to how to tackle the problems!
Oil and gold surged today, with oil finding a temporary top at $52 per barrel, as investors now speculating that by printing money as a new plan, FED opens the door for more inflation and therefore further economic woes! The gold also skyrocketed to new highs and the weakness in dollar now is visible everywhere!
Is this the start of something bigger? Are we back in the good old days, when fundamentals reflex on market moves? This is very likely, as for the first time in months, we saw dollar weakening as an aftermath of FEDï¿½ï¿½s latest action and the worries of investors about the future of US economy sparked a dollar dive and not a dollar rally as we saw previously! Letï¿½ï¿½s see how this one plays out and if in the next days to follow, traders sell the dollar aggressively when bad data keeps confirming their worst fears-that US economy is going down and maybe there are more nasty surprises in the employment sector over the next few weeksï¿½ï¿½
As a last note, do not let the euro and pound rally misguide you into thinking that all of a sudden Euro zone and UK are out of the damps! Mr. Trichet and Mr King have their own battles to fight in the coming days and it will be interesting to see what ECB do in their next monetary meeting! There is a lot of speculation by market participants that the bank may be forced to cut below 1%, and eventually adopt a zero rate policy like the others. If the economic data continue to disappoint then anything is possible and therefore euro bulls should never underestimate the power of the dollar as a safe currency! When economies fall globally, the dollar is always preferred as a safety net, as it has less chances of failing completely rather than any other currency in the worldï¿½ï¿½