U.S. dollar subject of another Fed dilemma?

Market Pulse for June 6

On May 1, 2013 the June 2013 U.S. Dollar Index opened at 81.740 and closed the month on May 31 at 83.401. In May we saw a high of 84.595. This past week the Index opened at 83.695 hit a weekly high of 84.430 and as mentioned above closed the week at 83.401.

Now the Federal Reserve (Chairman Ben Bernanke himself) knows how a weaker U.S. dollar helps U.S. exports. Did you see today’s U.S. export number for April in the U.S. Trade Balance Report? The number was the second highest on record. Any threat to U.S. exports — a strengthening U.S. dollar — could hurt exports, in turn hurting the U.S. economy, which could hurt jobs. Look at the price action in the U.S. Dollar Index over the past few weeks. See how it rose sharply on the days confidence was high the Fed would taper stimulus sooner than later. The scaling back of QE3 heading toward ending QE3 will more than likely have a very bullish effect on price.

So, we see that the U.S. Dollar Index would really need to come down a bit before any announced tapering of U.S. stimulus. The real question becomes: Do you think Ben Bernanke will taper QE3 before he leaves his post as Fed chairman early next year? Have a prosperous trading week.

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