Traders are likely to remain in a Euro Bullish mode despite the firming up of the US dollar Tuesday on what market participants describe as a wariness of any further intervention by the BoJ, and the increasing uncertainty over the size and timing of a much anticipated round of stimulus by the Fed.
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USD Recovery: The US dollar had its worst month since May 2009 against a basket of currencies and the slight USD recovery is very welcome news even amongst the euro bulls, as it basically allows them the opportunity to enter their putative strategies at a more advantageous levels. The movement in the dollar index has a lot of affect on commodities and other currencies, even if it does not replicate the action of the index. But the USD needs some sort of a trigger mechanism to come out of its negative sluggish cycle. Some of the points that can trigger the positive spike in the Dollar index are discussed here.
Fed Public Debate Grows: Meanwhile, the Fed’s members continued a very public debate of the central bank’s policy, with Kansas City President Hoenig stating that QE could do more harm than good while the newly appointed Fed Vice President Yellen voiced her concern about extraordinary low rates, saying they may motivate investors to ‘reach for yield’ by engaging in excessive risk-taking. If the public Fed debates are to be considered as the yardstick for future policies, it's gives the impression that the Fed has many options up its sleeve. But there is a growing market view that the Fed would not utilize any other choice and instead hold the rates near zero to try to implement further accommodative measures simultaneously.
In FX markets, the mere thought that the Fed was considering adding more liquidity via QE was sufficient to weaken the dollar by 5.5% from mid-September to early October against its trade weighted currency basket and by over 9% against the euro.
Euro ETFs To Watch Out For:
Rydex CurrencyShares Euro Currency Trust (FXE): The EUR/USD exchange rate is a foreign exchange spot rate that measures the relative values of two currencies, the euro and the U.S. dollar.
FXE Tracks: Euro Index. Expense Ratio: 0.40%
Short Euro ETFs
ProShares UltraShort Euro (EUO): ProShares UltraShort Euro seeks daily investment results, before fees and expenses, that correspond to twice (200%) the inverse (opposite) of the daily performance of the U.S. Dollar price of the Euro.
EUO Tracks: Euro (-200%) Index. Expense Ratio: 0.95%
Market Vectors-Double Short Euro ETN (DRR): As the Index is two-times leveraged, for every 1% weakening of the euro relative to the U.S. dollar, the level of the Index will generally increase by 2%, while for every 1% strengthening of the euro relative to the U.S. dollar, the Index will generally decrease by 2%.
DRR Tracks: Double Short Euro Index. Expense Ratio: 0.65%
Long Euro ETFs
ProShares Ultra Euro (ULE): ProShares Ultra Euro seeks daily investment results, before fees and expenses, that correspond to twice (200%) the U.S. Dollar price of the Euro.
ULE Tracks: Euro (200%) Index. Expense Ratio: 0.95%
Market Vectors-Double Long Euro ETN (URR): As the Index is two-times leveraged, for every 1% strengthening of the euro relative to the U.S. dollar, the level of the Index will generally increase by 2%, while for every 1% weakening of the euro relative to the U.S. dollar, the Index will generally decrease by 2%.
URR Tracks: Double Long Euro Index. Expense Ratio: 0.65%
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