Business News: The U.S. Dollar Is Vulnerable, But It's Temporarily

By: Dmitriy Gurkovskiy

The EUR/USD is heading for 1.20.

The statistics is against the American currency due to the difference between real numbers and expectations.

One has to follow what the Federal Reserve and the Department of the Treasury may possibly undertake.

The US Dollar can’t manage to continue growing, and the more attempts to rise it makes, the more doubts appear that it can really rise during this particular period of market fluctuations. The EUR/USD has clearly set a course for 1.20 and may resume falling only after reaching this level.

The statistics is against the USD so far. The numbers published last week, which were followed with insight, turned out to be weaker than expected and investors lost their interest (that was already very low) to the American currency. For example, the Retail Sales expanded by 1.6% m/m in September, which is quite good in comparison with the August reading of –0.1% m/m, but it’s still less than the expected number of +1.7% m/m. The same can be told about the inflation in September. The CPI increased by 0.5% m/m after adding 0.4% in August. And that'd be okay, but investors expected +0.6% m/m. On top of that, the Core Inflation added only 0.1% m/m although it was expected to increase by 0.2% m/m.

Taken together, these two catalysts were able to make investors’ attitude to the USD even more negative. The US Federal Reserve with the plan to sell assets on its balance sheet and the U.S. Department of the Treasury that was ready to increase the national debt were put on the back burner. Like it was already said, and it’s still true, both of these plans will lead to the US Dollar strengthening. It’s just a question of time.

There will be a lot of interesting statistical reports from the USA this week. In addition to that, Janet Yellen, the Chairwoman of the Federal Reserve, will speak on Friday. Speculations about candidates for her position died down for a while, but may revive at any moment.

Any information about possible activities of the US monetary authorities will support the Dollar regardless the market situation at that moment. One just have to wait, that’s all.

source: seekingalpha