August 23, 2012
The dollar got its butt kicked yesterday just like Jean-Claude Van Damme did in The Expendables 2. EUR/USD finished the day 54 pips above its opening price at 1.2522 while GBP/USD closed with a 91-pip gain at 1.5867. On the other hand, USD/JPY was 70 pips lower from its opening price at 78.54.
So why did the dollar get whooped in yesterday's trading?
Contrary to what most market junkies were expecting, the FOMC meeting minutes showed that the Fed is eager on providing the economy with more stimulus. The Fed said in its statement that "substantial and sustainable" signs of economic growth are absent. And so, further monetary policy easing may be "warranted fairly soon."
Of course, those remarks gave dollar bears enough piptorade to hustle some muscle. Some market junkies say that we could see the central bank take more action as early as September!
Since the minutes gave markets a clear indication on the Fed's stance regarding further easing, after being vague about it in the past few months, it may likely continue to dictate price action in today's trading. I doubt that traders will be quick to forget the dovishness.
However, who knows, perhaps the dollar could pare some of its gains should updates come out from the euro zone and spark risk aversion. Or maybe the dollar could find some support on the charts with the roster of economic reports we have on tap today.
The unemployment claims is due to come in at 12:30 pm GMT and it is eyed at 365,000. Then at 1:00 pm GMT, the U.S. flash manufacturing PMI for August is seen at 51.3. Last but not the least, new home sales for July is anticipated to print at 363,000.
Better-than-expected figures could help keep the dollar afloat while worse-than-expected figures could send it lower as they would affirm the Fed's eagerness for more stimulus. So watch out for
Last edited by PipDiddy; 08-23-2012 at 03:20 AM.
"The only cable I watch is the pound baby."