- Forex Commentary -

September 22, 2010 (FinancialWire) (Investrend Information Syndicate) (Via Brewer Investment Group) (Overnight, September 21, 2010, Report) (Go to http://www.financialwire.net/2010/09/22/futures-18/ for today’s Futures commentary.) — For our readers with an interest in currency related equities such as the PowerShares DB US Dollar Index Bullish Fund (NYSE: UUP) and the PowerShares DB US Dollar Index Bearish Fund (NYSE: UDN), FinancialWire(tm) contributor Brewer Investment Group provides us with some related perspective and insight regarding those markets:

The U.S. Dollar fell sharply lower versus the Euro and the Japanese Yen Tuesday afternoon after the Federal Open Market Committee hinted that it stood ready to provide stimuli for the U.S. economy. The suggestion of additional quantitative easing conjured up images of the Fed firing up the Treasury printing press, thereby weakening the Dollar.

The FOMC statement suggested that the Federal Reserve may be preparing to provide more stimuli, most likely at its next meeting in November. This news confirmed what investors were looking for prior to the decision. The Fed cited the main reasons for considering additional stimulus were rising unemployment and falling prices. Today’s Fed statement brought up concerns about deflation for the first time since its loose monetary policy began.

In addition to the soft nature of the Fed’s monetary policy decision, favorable debt auctions in Spain and Ireland lit the initial fire in the EUR USD on Tuesday morning.

The stronger Euro reflected the growing sentiment that the Euro Zone economy is recovering faster than the U.S. economy. The hint at an increase in QE by the Fed is a strong indication that the FOMC believes the same. Furthermore, additional QE will keep pressure on U.S. interest rates, while a faster recovery in Europe will bring that economy closer to an interest rate hike.  Investors will look to invest in the higher yielding currency.

Technically, after hovering near last week’s high at 1.3159 earlier in the session, the EUR USD moved sharply higher after the Fed hinted at additional easing. The strong close has put the Euro in a position to test the early August high at 1.3334. An uptrending Gann angle at 1.3244 is providing guidance at this time.

The Fed’s hinting at further quantitative easing helped drive the USD JPY lower. Today’s lower-low formation formed a new swing top at 85.93 and gave the first indication since last week’s intervention that the market has most likely absorbed the $17 billion of Yen selling pressure. A new main range has been formed between 82.88 and 85.93. This makes the retracement zone at 84.40 to 84.04 the next likely downside target.

Many traders were surprised the 85.00 level was breached so easily this afternoon.  Some believed that this would be the ideal price for the Bank of Japan to defend. Once traders saw that there was no sign of central bank activity, the Dollar/Yen became easier to sell.

Source: Courtesy of Brewer Investment Group, LLC; For more information, content and/or a preferred introduction to Brewer Investment Group, LLC and/or Brewer Futures Group, LLC, contact Investrend Syndications (via http://www.investrend.com/synd0001), and go to http://www.financialwire.net/?s=brwrgrprgw for other commentaries courtesy of the Brewer Group.

Brewer Investment Group, LLC, advises that Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. The value of currencies may fluctuate and investors may lose all or more than their original investments. Risks also include, but are not limited to, the potential for changing political and/or economic conditions that may substantially affect the price and/or liquidity of a currency. 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. The leveraged nature of FX trading means that any market movement will have an equally proportional effect on your deposited funds and such may work against you as well as for you. In no event should the content of this correspondence be construed as an express or implied promise or guarantee from Brewer FX, LLC and Brewer Investment Group, LLC or its subsidiaries and/or 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 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. Information contained in this correspondence is intended for informational purposes only and was obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. For more information, content and/or a preferred introduction to Brewer Investment Group, LLC and/or Brewer Futures Group, LLC, contact Investrend Syndications (via http://www.investrend.com/synd0001).

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