US Dollar Continues Climb - Aussie Also Higher

Tuesday, 19 October 2010

It was a one way ride for the USD last night - as the currency pushed slightly higher against most of its trading partners - except for the Aussie Dollar. Despite hitting a 10 month low just a few weeks back against a basket of currencies - the USD has recovered a little bit of ground as a result of the tight lipped nature of the Fed on quantitative easing measures.

At 12:40pm in Japan, the US Dollar index was trading higher on the open of the market at 77.40 - which is a broad rise against this time last week.

Against the Euro, the USD traded higher - pushing the EUR/USD down to 1.3881 - which is still hugely elevated from the low of that currency pair at around 1.1800 earlier in the year. That seems to be a difficult thought to have to cast our minds back to - remembering of course that the advice being given by market commentators at the time was to sell, sell, and continue to sell the Euro.

People who took that advice - without employing the right risk management trades - would have had a sore after effect left on their capital accounts.

Nevertheless, back to the USD - it is the prospect of future quantitative easing which is really driving the market at present. Many investors are therefore scared to commit to a particular trade, for fear that the Fed will then come straight in and announce major quantitative easing measures - turning the market right on its heel.

Thus, most traders have decided to wait and see what happens in the coming weeks - especially in terms of the USD/JPY which is still subject to intervention by the Japanese Foreign Ministry at the whim of further losses.

On the statistical side, we are now able to gauge a clearer picture of last week in FX markets - thanks to stats published by the Statistics department. From these stats we know that net short postions of the USD dropped to just $29 billion - which is a fair way off what they were the week before (1.5 billion less).

It would therefore seem that the feel in the market is turning, and investors are heeding the words of caution by commentators that they should be looking to protect their accounts in any way possible. Whether that be by utilizing risk management trades, or of course by simply staying out of the market - whichever way works for a particular investor is highly recommended at this time.