Trade Idea: 2012-9-14 1:31 am EST
As you can see, the pair just broke support at the 200-SMA on the daily timeframe. As I said a couple of weeks ago, a lot of traders pay attention to the indicator, using it to determine trends. So could the break could indicate that the pair is about to start a new downtrend?
Second, and more importantly, the Fed just announced another round of quantitative easing. In the last two times the Fed engaged in QE, the dollar was sold-off heavily for a few months. Quantitative easing, even though aimed to stimulate the economy, can be seen as negative for the domestic currency.
This QE3 could result in an even stronger dollar sell-off, as it is open-ended. It means that the central bank doesn’t really have a set limit to the money it will print. According to the Fed, they would continue to pump stimulus to the economy as long as the U.S. labor market remains weak.