USD Analysis: Dollar on Track to Break Losing Streak

ForexNewsNow | Published on October 22, 2010 at 11:32 am

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EUR USD analysis - a pile of dollarsNEW YORK (Forex News Now) – Today’s realtime forex analysis for the dollar indicates that the currency is set to break a weekly losing streak that has been going for the past five weeks.

Over the past five weeks, the U.S. Dollar Index is down over 7%, but has managed to gain 0.4% since Monday and is set to end the week higher for the first time since early September.

Investors mainly looked to take in profits from gains in the euro and other currencies ahead of the G20 meeting this weekend, and pulled back from selling the dollar until the results of the agenda-setting meeting become known.

Technical resistance in front of the euro around the $1.40 mark also is helping the dollar to gain in trading so far today.

While breaking the streak is good news for dollar investors, it is not necessarily the forerunner of a long-term winning streak for the dollar.  Most analysts believe that with monetary easing on the calendar, and more competitive monetary policy being adopted by the European Central Bank and euro zone members, the dollar still has a ways to go before regaining significant momentum.

With that being said, the new policy enacted by the Federal Reserve could spark the economy in 2011.  That, combined with austerity measures in Europe coming into play in 2011, could provide a one-two punch that sends the dollar up and the euro down.

Mark McCormick, a strategist at Brown Brothers Harriman, echoed these sentiments, saying, “Once austerity measures take effect in Europe, the economy may contract relative to the U.S., a headwind for the euro.”

McCormick also predicted that EUR/USD would oscillate “over the near term between $1.35 and $1.40, at least until we see what sort of quantitative easing the Fed has in store.”

John Taylor, the chief investment officer and chairman of FX Concepts, predicts that the euro will reach a peak near the $1.45 level and could possibly reach parity with the dollar in 2011 – although such a prediction is predicated on a variety of factors that have not yet come into play.

In realtime forex trading today, the dollar is up 0.06% on the euro, to 1.3913, and is up 0.18% on the yen, to 81.46. The dollar has also gained against the pound, moving up 0.31% to 1.56, but is down 0.11% against the Canadian dollar and 0.2% against the Aussie.

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