Unlimited Bond –Purchase program

As anticipated the Market reacted to the news and numbers released last week. Firstly on Thursday 06^th September,  BOE and ECB kept interest rates unchanged. During the press conference that followed  the interest rate decision by the central banks, ECB’s president Mario Draghi announced unlimited Bond –Purchase program. Traders reacted to his statement and considered it to be a very strong indication that he will deliver on his promise to “ do whatever it takes “ to support  the Euro.  The following day  Friday 07^th September Non Farm Payroll data was published showing that the economy in the US added 96K workers last month, following revised rise of 141K in July, smaller than initially estimated. Expectations were a gain of 130K jobs created.  The unemployment rate in the US fell to 8.1%.  Market reaction was extremely Bullish to worse than expected numbers,  the prevailing sentiment amongst traders was that such news would clear the way for anticipated QE3. US Dollar pulled back, Equity Indices and some Commodities and Metals rallied, breaking through long term overhead resistance trend lines and levels.   

US Dollar Index price fell below the rising support trend line and also 200 Day SMA.  USD price action is currently retesting 80.25 level which is very close to the 38.2% Fib Retracement from September 2011 low 73.45 to the most recent August 2012 high of 84.10. The possibility of  Federal Reserve intervention and QE3 is extremely Bearish for USD. Support on the downside is located at 79.68 which is 50% Fib Retracement followed by 77.39 which is 61.8% Fib retracement.  Alternatively, Resistances on the upside are located at 81.76 which is 20 Day SMA followed by 82.45 which is 50 Day SMA.  Indicators like MACD, Stochastics and RSI are at or reaching oversold levels. Any potential retests of the previous support trend line and now newly formed resistance could be seen  as an opportunity for Short entry by Bearish traders.