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USD Return To QE3 Price Sets Up A Euro Breakout

By Dr. Duru CurrenciesJun 26, 2013 01:09PM ET
www.investing.com/analysis/usd-return-to-qe3-price-sets-up-a-euro-breakout-172999
USD Return To QE3 Price Sets Up A Euro Breakout
By Dr. Duru   |  Jun 26, 2013 01:09PM ET
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Almost three months have passed since the Federal Reserve announced a third round of quantitative easing. In that time, a Presidential election and now audible negotiations over the Fiscal Cliff have pushed QE3 to the backburner of media headlines. The lack of impact shows immediately in the path of the U.S. dollar index.

Dollar Index
Dollar Index

Source: FreeStockCharts.com

This churn undermines most attempts to explain the dollar’s weakness at one time and its strength at another time, but what is certain is that the Federal Reserve is just getting started on rebuilding its portfolio of mortgage-backed securities (MBSs) through QE3.
Fed Held Mortgage-Backed Securities
Fed Held Mortgage-Backed Securities

Source of graph: St. Louis Federal Reserve (FRED)

Given the relative trickle of purchases, it is not clear that the dollar will weaken as a direct result of MBS purchases in QE3. For now, I prefer to look at the euro (FXE), a little over 50% of the value of the dollar index, as a stronger driver.
<span class=
EUR/USD" width="502" height="352">

Source: FreeStockCharts.com


Original Article

USD Return To QE3 Price Sets Up A Euro Breakout
 

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USD Return To QE3 Price Sets Up A Euro Breakout

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