Wed, Oct 20 2010, 19:42 GMTby James Hyerczyk
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0A report from Medley Global Advisors outlining the Federal Reserve’s plan to buy $500 billion of Treasury debt over six months to stimulate the economy is helping to pressure the U.S. Dollar at the mid-session.
The Greenback began accelerating to the downside last night after Medley’s confirmed comments made Tuesday by a Fed official that $100 billion a month in bond purchases may be appropriate to sustain the U.S. economy’s feeble recovery.
Medley’s report gave traders the green light to resume selling the Dollar as it clearly indicated the Fed was getting ready to start pumping money into the economy as soon as November.
Since last Friday, the Dollar had strengthened because of short-covering as many traders lifted bearish positions on the thought that perhaps they had over-estimated the size of the Fed’s commitment to its new quantitative easing program.
The Euro is a big gainer at the mid-session, boosted by the Medley report as traders entered new long positions in anticipation of the Fed easing. In addition to the Fed’s new commitment to restoring the strength of the economy, speculators bought the Euro on the thought that the European Central Bank may be getting ready to implement a tighter monetary policy.
Although the Euro is strong at the mid-session, gains could be limited because of this week’s G-20 meeting. In addition, some traders still believe the Dollar is oversold.
Technically,the Euro changed the main trend to down when it crossed 1.3775 on Tuesday. Short-term oversold conditions prevailed however setting up the possibility of a 50% correction of the break from the top at 1.4159. This means that 1.3928 to 1.3983 is the next potential upside target.
On the downside, overnight the market penetrated, but regained a major uptrending Gann angle at 1.3764. If the Euro is topping, then it is likely to fail between 1.3928 to 1.3983 within the next 2 to 3 days. Published on Wed, Oct 20 2010, 19:44 GMT
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