The U.S. dollar reversed going into the weekend in early trading today. The U.S. dollar index climbed to 79.86, up 0.72% on jitters of QE3, and it may continue to appreciate in the U.S. FOREX trading session as traders look to the U.S. dollar as a safe haven.The U.S. dollar strength is likely to be short-lived as analysts points to a soft inflation report that ticked up only 0.1%. Actual CPI fell in between the previous of 0.04% and the forecasted 0.02%.
Traders will be focusing on the speech from Fed chairman Ben Bernanke at 1:00 p.m. EST.
With the Fed officials continuing to shift their stance to the dovish side of monetary policy, traders looking for QE3 may find Bernanke attempting to strike a balance in his speech to try keeping QE3 on the table in order to encourage a stronger recovery, which seems to be heading into a soft patch.
Analysts are suggesting if the FOMC takes action it will most likely be in the form of extending ‘Operation Twist’ to continue to lift the housing market.
Bottom Line: The U.S. dollar is catching a bid going into the weekend but continues to face headwinds in the future. Look for a small short term bounce to fade as technicals once again take control.