Dollar Troubles Ahead?
As at the last FOMC-meeting,
Greenspan and his monetary followers did it again. For the 10’th time in a row
the FED fund rate was increased by 25 bps, and no stopping of the rate vendetta
is on the horizon yet according to the statement. The same FED procedure has not
been able to stir things up. My feeling is, however, that especially EUR/USD is
lying low these hours preparing for a decisive test and subsequent break of
124.20 with route towards 125. So patience is keyword again. 123.20-30 is
considered good support before the important 122.55-60 area. Worth watching too
is the dollar index trading around 87.70-80 p.t. A break below 87.70 will spell
dollar troubles in general ahead, and a revisit with 86 will be on top of the
agenda. Don’t get fooled by the ever increasing USD-rates. Right now the USD is
not responding to this previously good correlation with higher rates. The dollar
is in the midst of a correction despite the increasing rates. Maybe just maybe
market participants are beginning to look beneath the ever increasing rates
imposed by Greenspan. Quite obviously the American economy as a whole is not as
goldilocks as the FED wants us to believe. Inflation figures from the US are
buckling and yet rates are being increased. Greenspan is in for a fight with the
housing bubble, and knowing FED history they are always going one step too far
in their attempts to curb excesses. And that’s exactly the point of no return
for the FED, and the financial markets. So FED procedures are the same as every
other time, despite the fact that Greenspan is probably doing his very best!
Lone Oleson
Lone Oleson is a Senior Forex
Strategies for Jyske Bank based in Denmark. Ms. Oleson is antive Forex trader
with nearly 20 years of experience in currency futures.