International Trading


The EUR USD soared this morning, hitting a new-six month high, as a report indicating brewing weakness in the U.S. manufacturing sector supported speculators betting on additional quantitative easing by the Federal Reserve. Traders have been driving the Euro higher on the thought that the Fed will have to resume large-scale purchases of Treasury Bonds in an effort to provide liquidity to the economy to keep the recovery from derailing.

The Dollar has been under relentless pressure since the Federal Open Market Committee meeting several weeks ago. At this meeting the Fed hinted strongly about resuming its asset-buyback program, also known as quantitative easing. As long as QE remains on the table no one wants to hold Dollars.

This morning, the Institute for Supply Management’s Index of U.S. manufacturing activity fell to 54.4 in September from 56.3 in August. The number was not low enough to warrant fear of a double-dip recession, but not strong enough for the Fed to remove the threat of Fed QE.

The Greenback remained under pressure most of the day even though the Reuters/University of Michigan’s Final Consumer Sentiment report was revised upward to 68.2 from 66.6 and U.S. Consumer Spending rose to 0.4% in August, while incomes rose 0.5%.

Euro traders also shrugged off a report confirming a slowdown in the pace of manufacturing growth and an elevated regional unemployment rate of 10.1% in August.

This meant that traders are more concerned about the prospects of fresh QE by the Fed than a slowdown in the Euro Zone economy.

Technically, the Euro remains on pace to reach a major Fibonacci Retracement Level at 1.3896. There may be a technical bounce because of profit-taking at this level, but the trend should remain strong unless the 50% level at 1.3510 is violated.