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[dalcindo]

Re: $USD, $EUR, $JPY - $600 Billion Affecting $USD?

"Shouldn't $USD to go down and $XEU keep rising? "

THE SIMPLER ANSWER:
I think that the most intuitive answer would have that the US Dollar should lose value if the Fed was effectively buying out Treasury bonds and bad debts from banks, thus exchanging against it cash to replenish the banks coffers, and effectively devaluating the US Dollar. Whether this represents an indirect ploy to gain a competitive exporting edge against China or favoring export to boost exporting US companies remains a matter of debate. Nonetheless, the expectation is decline of the USD - But why is it not happening, one should asks.

THE COMPLEX SITUATION:
The action on the dollar may be delayed for the following reasons:
1 - The purchase is incremental, thus allowing a "controlled" insuflation of cash and cushioning the impact on the expected fall;
2 - The banks are becoming cash-rich, but not allowing cash to reached the general consumer market, at least not at a pace that could cause a sudden gain in consumer borrowing power. The concern here is merely inflationary pressure over time, as wider credit availability would spurt a demand on products and services, thus pressuring prices upwards overtime.
3 - There may be a perception that the release of $USD, coupled with recent positive economic data, may have elevated the expectation that the $USD remains a safe-heaven currency, despite the inflationary risk of a gradual, albeit massive monetary swelling. Here the idea is that a spurred consumer mass would increase demand for products and services, thus creating renewed employment by pressuring on the production side of the market, as well as improving companies revenues. So, the expectation is a rejuvenated, invigorated economy.


While economists and politicians may have conflicting views on the effect of the recent Fed's action, the recent data, coupled with the impression that "we could not get any lower", may have contributed to an elevated sentiment from this vantage point.


FOREX, TECHNICALLY SPEAKING:
At this time (0345 central time), the EUR:USD remains on the rise.

A reasonable "listhmus test" currency pair is the USD:JPY, which has topped off at $81.90 overnight, with a 15-minute chart heralding some internal weakness.

This same chart's 60-minute secondary indicators (RSI, MACD ad slow Stoichs) are tipping their head down after a lower high, further suggesting a high-probability reversal from recent bullish rise.

- Dalcindo


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Message in reply to:
The Fed's decision, in essence, to print $600 billion and pump it into the economy through Treasury bond purchases has drawn fire from foreign leaders, notably German Finance Minister Wolfgang Schaeuble, who say it amounts to currency manipulation. The action seeks to lift the U.S. economy in several ways, including by lowering interest rates, boosting the stock market and weakening the dollar, which would make U.S. exports more attractive.
Shouldn't $USD to go down and $XEU keep rising?



Coming into the meeting, hopes have dimmed that the G-20 will go beyond general principles on trade and currency and add what U.S. officials have characterized as "meat on the bones."

"We were not able to come up with the specifics," South Korean President Lee Myung-bak, the meeting's host, said in an interview. "That will be left to a working group. It will take some time."

Discussions among the leaders are scheduled for Thursday and Friday, with preliminary G-20 sessions to begin Wednesday.

The Obama administration proposal, endorsed by G-20 finance ministers last month, calls for the International Monetary Fund to evaluate how each nation's policies help or hurt others. Even if the details of this program were agreed upon by world leaders, it remains unclear how nations could be forced to revise their policies if they run afoul of the IMF because there is no enforcement mechanism.

"The critical question is when the G-20 will move beyond platitudes . . . and on to something concrete, something that might prompt some member of the G-20 to deviate" from the decisions it would otherwise make, said Phil Levy, an analyst at the American Enterprise Institute.

The world leaders also face a challenge in determining what exactly balanced trade would look like.
http://www.washingtonpost.com/wp-dyn/content/article/2010/11/09/AR2010110907512.html

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- Dalcindo