The Repercussions of nearly One Trillion in QE
by Dan Norcini
Post Edited: November 3, 2010
THE PRICE ACTION IN THE DOLLAR AFTER TODAY’S RELEASE OF THE FOMC STATEMENT from their early November meeting generated a great deal of price volatility in the currency markets this afternoon. When the initial knee jerk reactions were finished and the more sober-minded had some time to digest the repercussions of nearly ONE TRILLION DOLLARS of QE, the Dollar came under pressure which took it down below the 77 level which had temporarily been serving as downside support in front of today’s meeting.
The technical damage is becoming quite severe as it is now perched precariously above an important support level near 75. Judging from the fresh sell signals being generated by more than a few technical indicators, it is difficult for me to see how it can maintain its footing above this level barring a sudden and unexpected improvement in the various US economic statistical releases of the next couple of weeks. In short, it would not take much to see the Dollar drop through 75 and then plummet down towards 72, a level, which if broken, would prove to be a watershed moment for our nation.
I would suspect that we would see some sort of attempt to prop the Dollar on its first approach towards 72 but that would only stem the decline for a brief period unless the QE were withdrawn or the monetary authorities were to walk back on the size and scope of today’s announcement. That would of course necessitate a dramatic improvement in the economy which is why I cannot see that occurring.
It is my opinion that the US has long wanted to engineer a manageable decline in the currency on account of the now mathematically-impossible-to-ever-pay-back debt load that our nation has been saddled with. They will get their wish but at a terrible cost to the rest of us and to the nation at large as it watches its economic supremacy gradually fade. That will be the legacy of the Federal Reserve system and the contemptible monetary authorities who sold out our nation’s birthright for a bowl of stew.