The dollar advanced for the second consecutive day after confidence evaporated from the market, where investors are worried about the extent of QE and expect the feds to deliver much less than expectations.
With the decline in the risk appetite and the pessimistic start for the week, the dollar advanced and equities declined all supporting haven demand and sending commodities lower as well as other major currencies. Investors are focusing now on the coming move and the effect of the expected stimuli measures from central banks on the outlook for the recovery.
The euro declined versus the dollar towards 1.3897 with the lack of European data where the market focused on Trichet’s comments and the open possibility he left for the ECB to extend stimuli measures. The pair failed to stabilize above 1.41 areas which supported the bearish reversal to retest the breached resistance for the ascending channel.
As for sterling, the pair also reversed lower, especially as the pound trades with volatility ahead of the BoE minutes and the Spending Review this week. The Center for Economics and Business Research projected the BoE to expand the stimulus by 100 billion pounds adding to the jitters in the market further. The pair rebounded from strong resistance areas at 1.6100 to currently trade around 1.5882 as far as trading remains above 1.5820.
Regarding the Japanese yen, it was trading within a tight range versus the dollar, around 81.00 areas though with a clear bias for the downside. The pair continues to be pressured by the 50 MA as well as Stochastic entering overbought areas.