- Technical Insight -

December 17, 2009 (FinancialWire) (Investrend Information Syndicate) — The PowerShares DB US Dollar Index Bullish Fund (NYSE: UUP) most recently closed with a slight net loss of $0.02 (-0.09%) to finish trading at $22.77 per share on volume of 5.7 million shares. The PowerShares DB US Dollar Index Bearish Fund (NYSE: UDN) most recently closed with a negligible net gain of $0.0001 (+0.00%) to finish trading at $27.92 per share on volume of 318.1 thousand shares.

FinancialWire(tm) contributor, Brewer Investment Group, issued some commentary going into today regarding the currency markets, providing an insightful preview:

The U.S. Dollar erased earlier losses after the Federal Reserve released its monetary policy statement.  The Dollar turned higher after trading most of the day lower after the Federal Open Market Committee offered more detailed plans to remove excess liquidity from the financial system.

The Fed also offered commentary on the economy, saying that deterioration in the labor market is “abating.”  This statement is a reaction to the decline in the unemployment rate earlier in the month from 10.2% to 10.0%.  The Fed did reiterate, however, that it will keep its benchmark interest rate at a historically low level for “an extended period.”

Bernanke and his friends also said “Household spending appears to be expanding at a moderate rate, though it remains constrained by a weak labor market, modest income growth, lower housing wealth and tight credit.”  This statement can be interpreted to mean the Fed still wants to see people getting jobs, consumers spending and banks lending money.

The EUR USD erased its earlier gain after the release of the FOMC statement.  This move was short-lived causing a two-sided trade into the close.  Technical issues could help support the Euro over the short-run, but investors are still monitoring sovereign debt issues in Spain, Portugal and Greece. Any new bearish developments regarding Euro Zone debt issues could pressure the Euro.

The GBP USD held on to its gains after the Fed released its monetary policy statement.  The British Pound was buoyed this morning by a better than expected initial claims report.

Profit-taking and overbought technical conditions helped pressure the USD CHF most of the day.  Shortly after the Fed announcement, the Swiss Franc weakened, but thin buying interest led to a quick turnaround.

The Fed news did very little to the USD CAD, which remains rangebound.  The Canadian Dollar received most of its support from the strong rallies in Gold and Crude Oil.  Continue to look for a range bound trade.

The USD JPY remained rangebound although the Dollar strengthened versus the Yen after the Fed announcement.  With the Fed outlining its exit strategy, Japanese interest rates are once again becoming the lowest in the world.  This is helping the Dollar gain against the Yen.

The AUD USD broke through .9000 earlier in the trading session, but was quickly bought up by bottom-pickers.  The weakness in the Aussie was triggered by a lower than expected 3rd Quarter growth rate.  The decline in the economy is proof that the Reserve Bank of Australia has enough evidence to take a pause from hiking rates a third consecutive time in February.

The NZD USD weakened in sympathy with the Australian Dollar.  A hike in U.S. rates will also tighten the interest rate differential between the U.S. and New Zealand, taking away some of the advantage the Kiwi enjoyed for over a year.  Today’s Fed statement indicates that U.S. rates will rise before the Reserve Bank of New Zealand acts.

Also see today’s Future’s Commentary (at http://www.financialwire.net/2009/12/17/futures)

Source: Courtesy of “BrewerFX Daily Forex Commentary”

For more information, content and/or a preferred introduction to Brewer Investment Group, LLC and/or Brewer Futures Group, LLC, contact Investrend Communications via resources@investrend.com with “Brewer” in the subject line.

Brewer Futures Group advises that futures and options trading involves substantial risk of loss and is not suitable for every investor. The valuation of futures and options may fluctuate, and, as a result, clients may lose more than their original investment. The impact of seasonal and geopolitical events is already factored into market prices. Prices in the underlying cash or physical markets do not necessarily move in tandem with futures and options prices. In no event should the content of this correspondence be construed as an express or implied promise, guarantee or implication by or from Brewer Futures Group, LLC, Brewer Investment Group, LLC, or their subsidiaries and affiliates that you will profit or that losses can or will be limited in any manner whatsoever. Loss-limiting strategies such as stop loss orders may not be effective because market conditions may make it impossible to execute such orders. Likewise, strategies using combinations of options and/or futures positions such as “spread” or “straddle” trades may be just as risky as simple long and short positions. Past results are no indication of future performance.

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