(This is an excerpt from an article I originally published on Seeking Alpha on October 10, 2012. Click here to read the entire piece.)
Just a few days after writing that the U.S. dollar’s post-QE3 rally was giving way to meandering, the U.S. dollar (UUP) surged back to the top of the recent relief rally range and closed at its highest post-QE3 level to-date.
For now, I am expecting overhead resistance at the declining 50-day moving average (DMA) and the flattening 200DMA to hold. However, the recent breakdown of crosses with the likes of the British pound (FXB) will make this call a close one. Trouble seems to be brewing for the British pound…{snip}
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Source for charts: FreeStockCharts.com
Likely weighing on the pound is recent news that the UK government is likely to extend its forecast for austerity through 2018. This stretches the austerity plan from the five years projected in 2010 to eight years. George Osborne, the UK Finance Minister put a good face on the news by stating:
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Of course, when monetary authorities are manipulating rates lower, it is hard to use them as an indicative signal. {snip}
This extension of lean years is sure to test the nation’s resolve to try to cut its way to prosperity. It is interesting, and not unexpected, that the government’s response to austerity’s failure is to prescribe more austerity. {snip}
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Be careful out there!
(This is an excerpt from an article I originally published on Seeking Alpha on October 10, 2012. Click here to read the entire piece.)
Full disclosure: no positions