U.S. dollar’s response to QE2 and where we go from here

Market Pulse: Nov. 8, 2010

U.S. dollar’s response to QE2 and where we go from here

Last week the December 2010 U.S. Dollar Index opened at 7710½ and closed the week at 7669. The low for the week came in at 7523½ on Wednesday after the Fed’s QE2 announcement of $600 billion. While many “analysts” expected $500 billion, which could have been baked into the index number already, the extra $100 billion did send the U.S. dollar down. By Friday, people may have realized, “So what? What’s an extra $100 billion on today’s numbers?” Of course, the election results, the new political landscape in Washington D.C. and the “much better” then expected jobs report on Friday may cause the Fed to lower the QE2. In Europe, the sovereign-debt problems have popped up again and some EU spokespeople are saying what they can to calm nerves. Looking at the daily chart below, you can see the past trigger points. You also can see just how strong the downtrend was and just how much it has weakened.

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