While many of the consequences of stimulating economic growth through currency devaluation and cuts in interest rates are known and intended, some are not. In the case of Japan’s lost decade, for example, a depressed currency and low interest rates led to carry trading.
The greenback pared gains amid speculation it gained too much, too fast, and as U.S. Treasury yields fell. The currency jumped earlier as a private report showed U.S. companies added more than 200,000 workers for a sixth month.
You know by now that nothing bad happens to the market when the BKX is up. Dow theorists will also tell you nothing bad happens when the Transports are up. So when both are up there’s no use fighting the tape.
The Fed has said since March interest rates would stay low for a period after it completes a bond-buying program under the quantitative-easing stimulus strategy. Policy makers in July reduced monthly bond purchases to $25 billion in their sixth consecutive $10 billion cut.
Since late March, AUDUSD(CME:ADZ4) has been trapped in a tight range between support at .9200 and resistance at .9500. Over that time period however, the price action has carved out a large head-and-shoulders pattern.
Commodities across the board are finding it harder to try to establish support as currencies in Europe continue to get crushed. Not only has the euro, which has been hit by the ECB's quantitative easing but the British pound Sterling that has been rattled with the possibility of Scottish independence.
The U.S. dollar reached an 11-month high on two very positive days, Aug. 19th and 20th respectively. While the Dollar Index is at its highest level since September 2013, the Euro broke the 1.33 level for the first time since that same time.