The next Trader Development Course starts March 10, 2010
Stabilized Rates in the UK and EU Just Aren't Enough
With the exception of the USD/JPY, US Dollar strengthened across the board overnight, even though the Bank of England and the European Central Bank kept rates steady. There are just too many variables lining up to hammer the European Union right now and that has brought strength to the USD against the Euro for obvious reasons. But it has also had the unintended consequence of bringing strength to the Japanese Yen.
With insurmountable debt in both Portugal and Greece and astronomical unemployment numbers in Portugal and Spain the stock markets in Europe have taken a huge hit and that triggers the fear button. You combine that with China’s monetary tightening and surprise corrections in the Reserve Bank of Australia's monetary policy and you've got a whole heck of a lot of reasons for people to be buying back any trade that even remotely looks like a carry trade.
What this means for the USD bulls is that if the market is buying dollars on fear today it is likely that we'll see a pause today as the big money waits for a good jobs report on Friday, 2/5/2010, which will give them further reason to buy on fundamentals.
The USD could be in for another run to the upside. Long term USD bulls will need to keep in mind that any strong moves to the USD side will likely be corrected by next Tuesday, as industrial numbers come out of Germany.
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