Graphic Rewind: Buying the Dollar on a Debt Deal Rumor, Then Selling It on News
- US Dollar sells off on official announcement of the anticipated debt deal
- Greenback traders jittery on a ratings downgrade
- US Dollar hits a five month low
A look back at the past 24 hours of Forex trading using movements in the US Dollar Index:
US Dollar 15-Minute 08:00 10/16 to 08:00 10/17 EST
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The Dow Jones FXCM Dollar index perfectly displayed a ‘buy the rumor and sell the news’ pattern during the lead-up and then announcement of a deal to end the government shutdown and suspend the debt ceiling.
In the first half of Wednesday’s NY session, the US Dollar rose to a four day high and US stock markets rallied on rumors that the leaders representing Democratic and Republican Senators had come to an agreement to pass the anticipated bill. However, a little after noon EST, Senators McConnell and Reid together officially announced the deal in front of the Senate, and the US Dollar began its decline.
The US Dollar closed a bit higher than the open by the end of Wednesday’s trading, and the greenback index only declined slightly until the London session start. Then, the US Dollar tumbled to a five month low on news that the Chinese Dagong rating agency downgraded the US from A to A-. Although Dagong is a small agency, the downgrade touched on fears that other ratings agencies will downgrade US government debt, as the next debt ceiling showdown may happen again in February.
Charts created by Benjamin Spier using Marketscope 2.0
-- Written by Benjamin Spier, DailyFX Research. Feedback can be sent to email@example.com .
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.