Dollar Recovery

Written by Research | 28 October 2009

NOT very Convincing !

US Dollar recovery is yet to be looked upon to whether it is a true sign that better times are ahead. From our previous posts, we did mention that the much awaited correction for the US Dollar is in place. Although, there are no real fundamental economic support to justify such a corrective move. Since most economist have been weary that with the over blown deficits of the US States as stated before will dampen the US dollar more towards the year.

Against all odds and cyclical signs of the a corrective move though technical in nature this end of the year. The upcoming GDP report this thursday, the ISM manufacturing index plus the personal income reports due will provide a much needed boost for the US Dollar if the reports would be positive. As everyone else has already been questioning the supremacy of the US Dollar as the World's Reserve Currency.

With the earlier correction of the GBP/USD as influenced by UK manufacturing report still lurks in the market. As the EUR/USD followed suit earlier in the trading session as the US Dollar Index made a recovery with the USD/JPY as well. These are signs that the market place may have reached a temporary exhaustion as traders makes necessary adjustments again towards the end of the months ' trading activity as we also do.

However, when such adjustment periods are done the probability of a carry over sentiments for the US dollar to continue its recovery will really depend on the economic reports. Although, mixed in market sentiments; we would see more positive outlook for the dollar as the signs in the stock market and investor's shifting to the US dollar may find some support.

The cross-rates atill remain our favorable choice to trade as the EUR/JPY ont he upside may still look good and for the GBP/CHF to do otherwise. But the USDX price levels above the 76.90 may only be the sole price signal that will determine the upside potential of the US dollar at this time.

As investor sentiment much awaited for the past seven months have finally produced a noticeable correction. The pullback in yield appetite was in equities, commodities and fixed income have shown some sondifence int he market place. However, the recovery made that may look like a reversal was in favor of the US dollar.

The US Dollar consolidated in overnight trading after the upward momentum in New York session made stocks drop and supported a demand for the safety-correlated currency. And the Australian Business Confidence reported the highest in 15 years in the third quarter of this year; according to the National Australia Bank. Risk sentiment is set to continue guiding markets in European trading. As the Aussie and the Kiwi made some corrective movements in line with the US dollar recovery for the time being.