Likely Scenario

Written by Research | 04 November 2009

On the US Dollar

With the Reserve Bank of Australia (RBA) raising the rates 0.25 basis points as expected to raise it higher to a 4.0% sooner than most may expect. but that is not the likely scenario. This has been quite expected in the forex market as the Aussie continued to move upwards.

As most central banks are really eyeing their focus on the diminishing US Dollar after this corrective movement which gave some temporary relief with good numbers from the GDP yet a disappointing figure with Consumer confidence.

With that said, a carry trade increase with the US Dollar & Aussie will likely prevail with the discrepancy on interest as most investors now obviously would like to do as well. Attracting more US Dollar to exchange with the Aussie may also spark some fresh demand for the Greenbuck prompting some US Dollar speculative move for cash capital investments.

As we have seen a rapid trading range for the USDX between the 75.08 low to a recent high of 76.90 basis point prompting the GBP/USD to move to a low of 1.6217 and 1.4643 for the EUR/USD respectively on the European and towards the US trading sessions of Nov. 03, 2009. This volatility added to the wider trading range of the Majors more than that of the USD/JPY which held most of its price while the rest was apparently moving dramatically in the sessions.

The first attempt of the USDX towards its resistance of 76.90 draw a pull back which is very normal in such market conditions. A second assault may likely come towards the end of the week or the week after where most other traders would continue to shift and adjust trade positions before the end of November. Still, we tend to speculate more for a corrective movement of the US Dollar higher before the end of the year simply base on it s supposedly cyclical pattern of price adjustments.

Watch for this wild swings were it may be quite vulnerable for the retail investors as stop loss may easily be triggered during volatile periods.