{"id":14606,"date":"2012-10-22T00:06:10","date_gmt":"2012-10-22T07:06:10","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=14606"},"modified":"2012-10-22T00:06:10","modified_gmt":"2012-10-22T07:06:10","slug":"dollars-post-qe3-relief-rally-likely-to-give-way-to-meandering","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2012\/10\/22\/dollars-post-qe3-relief-rally-likely-to-give-way-to-meandering\/","title":{"rendered":"The U.S. Dollar&#8217;s Post-QE3 Relief Rally Likely To Give Way To Meandering"},"content":{"rendered":"<p><strong>(This is an excerpt from an article I originally published on Seeking Alpha on October 10, 2012. <a href=\"http:\/\/seekingalpha.com\/article\/908811-the-u-s-dollar-s-post-qe3-relief-rally-likely-to-give-way-to-meandering\" target=\"_blank\">Click here to read the entire piece<\/a>.)<\/strong><\/p>\n<p>The financial crisis of 2008\/2009 ended a long-term downtrend in the U.S. dollar (UUP). Ever since then, the Federal Reserve has been unable to grease the skids sufficiently to get this trend to resume.<\/p>\n<p><center><br \/>\n<figure id=\"attachment_14634\" aria-describedby=\"caption-attachment-14634\" style=\"width: 490px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/10\/121005_DXY0-monthly.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/10\/121005_DXY0-monthly.png\" alt=\"The U.S. dollar has churned in a wide range since bottoming with the 2008\/2009 financial crisis\" title=\"The U.S. dollar has churned in a wide range since bottoming with the 2008\/2009 financial crisis\" width=\"500\" height=\"350\" class=\"size-full wp-image-14634\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/10\/121005_DXY0-monthly.png 500w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/10\/121005_DXY0-monthly-300x210.png 300w\" sizes=\"auto, (max-width: 500px) 100vw, 500px\" \/><\/a><figcaption id=\"caption-attachment-14634\" class=\"wp-caption-text\">The U.S. dollar has churned in a wide range since bottoming with the 2008\/2009 financial crisis<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p>{snip}<\/p>\n<p>After the Federal Reserve announced QE3, the U.S. dollar dropped for two straight days. It has meandered higher ever since, even recovering all its post-QE3 losses.<\/p>\n<p><center><br \/>\n<figure id=\"attachment_14640\" aria-describedby=\"caption-attachment-14640\" style=\"width: 490px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/10\/121005_DXY0.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/10\/121005_DXY0.png\" alt=\"The U.S. dollar has remained resilient post-QE3\" title=\"The U.S. dollar has remained resilient post-QE3\" width=\"500\" height=\"350\" class=\"size-full wp-image-14640\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/10\/121005_DXY0.png 500w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/10\/121005_DXY0-300x210.png 300w\" sizes=\"auto, (max-width: 500px) 100vw, 500px\" \/><\/a><figcaption id=\"caption-attachment-14640\" class=\"wp-caption-text\">The U.S. dollar has remained resilient post-QE3<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p>Note that the dollar index is still below its 50 and 200-day moving averages (DMAs). I have shown in previous posts <a href=\"http:\/\/drduru.com\/onetwentytwo\/2010\/08\/03\/critical-juncture-for-usd\/\" target=\"_blank\">the importance of the 200DMA in determining the dollar&#8217;s next likely direction<\/a>. In this case, the odds favor a much lower dollar in the coming weeks.<\/p>\n<p>However, understanding how the dollar will decline is quite tricky. {snip}<\/p>\n<p><center><br \/>\n<figure id=\"attachment_14643\" aria-describedby=\"caption-attachment-14643\" style=\"width: 490px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/10\/121005_EURUSD.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/10\/121005_EURUSD.png\" alt=\"The euro bounces smartly off 200DMA support but can the rally be sustained?\" title=\"The euro bounces smartly off 200DMA support but can the rally be sustained?\" width=\"500\" height=\"350\" class=\"size-full wp-image-14643\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/10\/121005_EURUSD.png 500w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/10\/121005_EURUSD-300x210.png 300w\" sizes=\"auto, (max-width: 500px) 100vw, 500px\" \/><\/a><figcaption id=\"caption-attachment-14643\" class=\"wp-caption-text\">The euro bounces smartly off 200DMA support but can the rally be sustained?<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p>{snip}&#8230;The chart is a heatmap showing the locus of financial stress in primary and secondary bond markets in the U.S., the euro area, and the United Kingdom from 2007 to 2012. The U.S. is faring much better than the euro area where conditions are tight almost across the board. This means there is a natural force pointing in favor of U.S. dollars over euros. In a sense, this relative demand for U.S. dollars (especially as a reserve currency) allows the Federal Reserve room to print.<\/p>\n<p><em><strong>Click for a larger view&#8230;<\/strong><\/em><br \/>\n<center><br \/>\n<figure id=\"attachment_14646\" aria-describedby=\"caption-attachment-14646\" style=\"width: 290px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/10\/121006_HeatMapOfFinancialStress.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/10\/121006_HeatMapOfFinancialStress-300x152.png\" alt=\"Market functioning \u2018heat map\u2019 based on issuance and spreads data\" title=\"Market functioning \u2018heat map\u2019 based on issuance and spreads data\" width=\"300\" height=\"152\" class=\"size-medium wp-image-14646\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/10\/121006_HeatMapOfFinancialStress-300x152.png 300w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/10\/121006_HeatMapOfFinancialStress-1024x521.png 1024w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/10\/121006_HeatMapOfFinancialStress.png 1068w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a><figcaption id=\"caption-attachment-14646\" class=\"wp-caption-text\">Market functioning \u2018heat map\u2019 based on issuance and spreads data<\/figcaption><\/figure><br \/>\n<strong>The Bank of England&#8217;s Sources: Bloomberg, Dealogic, JP Morgan Chase &#038; Co., Bank of America Merrill Lynch and Bank calculations.<\/strong><br \/>\n{snip}<br \/>\n<\/center><\/p>\n<p>Financial stresses also remain relatively high in the United Kingdom as a function of the recessionary economy there and spill-over impacts from the stresses in the eurozone. {snip}<\/p>\n<p><center><br \/>\n<figure id=\"attachment_14648\" aria-describedby=\"caption-attachment-14648\" style=\"width: 490px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/10\/121005_GBPUSD.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/10\/121005_GBPUSD.png\" alt=\"The British pound is struggling to make new highs for the year versus the U.S. dollar\" title=\"The British pound is struggling to make new highs for the year versus the U.S. dollar\" width=\"500\" height=\"350\" class=\"size-full wp-image-14648\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/10\/121005_GBPUSD.png 500w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/10\/121005_GBPUSD-300x210.png 300w\" sizes=\"auto, (max-width: 500px) 100vw, 500px\" \/><\/a><figcaption id=\"caption-attachment-14648\" class=\"wp-caption-text\">The British pound is struggling to make new highs for the year versus the U.S. dollar<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p><a href=\"http:\/\/www.babypips.com\/school\/what-is-the-dollar-index.html\" target=\"_blank\"><br \/>\n{snip}&#8230;the yen&#8217;s contribution to a lower dollar seems tightly capped. {snip}<\/p>\n<p><center><br \/>\n<figure id=\"attachment_14649\" aria-describedby=\"caption-attachment-14649\" style=\"width: 490px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/10\/121005_USDJPY.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/10\/121005_USDJPY.png\" alt=\"The U.S. dollar grinds slowly lower against the Japanese yen\" title=\"The U.S. dollar grinds slowly lower against the Japanese yen\" width=\"500\" height=\"350\" class=\"size-full wp-image-14649\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/10\/121005_USDJPY.png 500w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/10\/121005_USDJPY-300x210.png 300w\" sizes=\"auto, (max-width: 500px) 100vw, 500px\" \/><\/a><figcaption id=\"caption-attachment-14649\" class=\"wp-caption-text\">The U.S. dollar grinds slowly lower against the Japanese yen<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p>{snip}<\/p>\n<p>Finally, the announcement of QE3 still marks the 52-week and near 5-year high in the S&#038;P 500 (SPY). The stock market is almost behaving as if it will need the dollar to resume its descent to regain\/sustain upward momentum&#8230;{snip}<\/p>\n<p><center><br \/>\n<figure id=\"attachment_14636\" aria-describedby=\"caption-attachment-14636\" style=\"width: 490px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/10\/121005_SP500.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/10\/121005_SP500.png\" alt=\"The S&amp;P 500 has made little progress since QE3 was officially announced\" title=\"The S&amp;P 500 has made little progress since QE3 was officially announced\" width=\"500\" height=\"350\" class=\"size-full wp-image-14636\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/10\/121005_SP500.png 500w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/10\/121005_SP500-300x210.png 300w\" sizes=\"auto, (max-width: 500px) 100vw, 500px\" \/><\/a><figcaption id=\"caption-attachment-14636\" class=\"wp-caption-text\">The S&P 500 has made little progress since QE3 was officially announced<\/figcaption><\/figure><br \/>\n<strong>Source for charts: <a href=\"http:\/\/www.freestockcharts.com\/\" target=\"_blank\">FreeStockCharts.com<\/a><\/strong><br \/>\n<\/center><\/p>\n<p>{snip}<\/p>\n<p>Be careful out there!<\/p>\n<p><strong>(This is an excerpt from an article I originally published on Seeking Alpha on October 10, 2012. <a href=\"http:\/\/seekingalpha.com\/article\/908811-the-u-s-dollar-s-post-qe3-relief-rally-likely-to-give-way-to-meandering\" target=\"_blank\">Click here to read the entire piece<\/a>.)<\/strong><\/p>\n<p>Full disclosure: no positions<\/p>\n","protected":false},"excerpt":{"rendered":"<p>(This is an excerpt from an article I originally published on Seeking Alpha on October 10, 2012. Click here to read the entire piece.) The financial crisis of 2008\/2009 ended a long-term downtrend in the U.S. dollar (UUP). Ever since then, the Federal Reserve has been unable to grease the skids sufficiently to get this &#8230; <a title=\"The U.S. Dollar&#8217;s Post-QE3 Relief Rally Likely To Give Way To Meandering\" class=\"read-more\" href=\"https:\/\/drduru.com\/onetwentytwo\/2012\/10\/22\/dollars-post-qe3-relief-rally-likely-to-give-way-to-meandering\/\">Read more<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[58,20,21],"tags":[115,1032,1591],"class_list":["post-14606","post","type-post","status-publish","format-standard","hentry","category-federal-reserve","category-forex","category-u-s-dollar","tag-monetary-policy","tag-qe3","tag-u-s-dollar"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>The U.S. Dollar&#039;s Post-QE3 Relief Rally Likely To Give Way To Meandering - ONE-TWENTY TWO: Trading Financial Markets<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/drduru.com\/onetwentytwo\/2012\/10\/22\/dollars-post-qe3-relief-rally-likely-to-give-way-to-meandering\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The U.S. Dollar&#039;s Post-QE3 Relief Rally Likely To Give Way To Meandering - ONE-TWENTY TWO: Trading Financial Markets\" \/>\n<meta property=\"og:description\" content=\"(This is an excerpt from an article I originally published on Seeking Alpha on October 10, 2012. 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Click here to read the entire piece.) The financial crisis of 2008\/2009 ended a long-term downtrend in the U.S. dollar (UUP). Ever since then, the Federal Reserve has been unable to grease the skids sufficiently to get this ... 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