The Dollar responded to the FOMC QE4 news exactly as one would expect, by moving lower. Additional quantitative easing of $45B per month on top of the existing $40B was enough to immediately drive down the Dollar. Although the reality is that the Cycle was already well positioned to accept this news as the path of least resistance is now comfortably to the downside.
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No matter how much of the news was priced into the markets, the confirmation of $1T per year of easing, well into 2015, is not a bullish policy for the Dollar. The Dollar has entered Week 13 and has struggled to make what would be any surprising final attempts at the Investor Cycle highs. At this point with a potential 3rd Daily Cycle in a failed state, I expect nothing but pressure on the Dollar going forward. It’s not going to be all downhill though; the Dollar stands on a slight crest overlooking what are the depths of the eventual Investor Cycle Low, still some 4-8 weeks away.
If you look closely at the above Dollar chart you will see that we have clearly entered the 2nd half of the Investor Cycle and the trend has moved to the downside. Once the Dec 5th low of 79.57 is taken out the declines should accelerate. But expect the Dollar to fight up to that point; in this macro environment all other major central banks are not exactly comfortable with a collapsing dollar and they too will resist this.
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