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Short-Term Future Of The Dollar
The optimism in the U.S. economy is very apparent, and not something you want to bet against as the recovery continues. The U.S. dollar lost ground against the euro Thursday, February 18, partially due to lower inflation numbers. A late Fed release announced a 25 basis point increase in the discount interest rate to 0.75%. This helped the dollar's strength. (Learn more in Top 10 Forex Trading Rules.)
The increase was not out of the question, but the timing was sooner than expected. As with all pairs, it's all about relative strength, and the problems faced by Greece could keep the USD gaining strength against the EUR in the months to come. Core consumer prices (CPI, minus food and energy) in the U.S. decreased according to the Labor Department. This further lowers the concern for inflation in the next quarter. The U.S. economy is looking like it is in a better position for business and expansion, but I wouldn't say it is out of the woods yet.
EUR/USD February 10, 2010 To February 19, 2010
The Fed's announcement injected some adrenaline into the recent bashing of the euro, as the EUR/USD pair broke through the prior support of around 1.3600 and subsequently plunged over 200 points in reaction to the news. Within a few hours, the pair appeared to settle down into a new short-term support of 1.3460 - 1.3470.
I don't expect this support to hold for very long with the amount of potential catalysts on the horizon - including the success or failure of a Greek debt issue this month. Coupled with the FOMC's surprise rate increase, the first increase in over three years, there are a lot of reasons to expect the downtrend in the euro to continue. (Learn why event-driven scalping in the currency market involves balancing fundamentals with technicals, check out Forex: How To Scalp Fundamentally.)
The increase was not out of the question, but the timing was sooner than expected. As with all pairs, it's all about relative strength, and the problems faced by Greece could keep the USD gaining strength against the EUR in the months to come. Core consumer prices (CPI, minus food and energy) in the U.S. decreased according to the Labor Department. This further lowers the concern for inflation in the next quarter. The U.S. economy is looking like it is in a better position for business and expansion, but I wouldn't say it is out of the woods yet.
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The Fed's announcement injected some adrenaline into the recent bashing of the euro, as the EUR/USD pair broke through the prior support of around 1.3600 and subsequently plunged over 200 points in reaction to the news. Within a few hours, the pair appeared to settle down into a new short-term support of 1.3460 - 1.3470.
I don't expect this support to hold for very long with the amount of potential catalysts on the horizon - including the success or failure of a Greek debt issue this month. Coupled with the FOMC's surprise rate increase, the first increase in over three years, there are a lot of reasons to expect the downtrend in the euro to continue. (Learn why event-driven scalping in the currency market involves balancing fundamentals with technicals, check out Forex: How To Scalp Fundamentally.)
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