It's on a longish term downtrend (against the CAD, at least) and it broke through support about a month back. I'm not betting the farm, but, hey, not a forex guy anyway.
Thanks longandshort. Do does the Fed only buy 1 year treasuries, and not other longer term treasuries like the 10 year or 30 year?
All that is well and good, but I don't think that matters. The prior numbers are what they are. The question is can the numbers of new dollars being supplied across the board, now increasing at a 23%+ annual rate, somehow be "absorbed" without causing inflation. I don't see how. If dollars were previously being increased at a [10%] annual rate, and now they are being increased at a 23% annual rate or more, how does the demand for eurodollar suddenly ratchet up from whatever it was before to soak up the HUGE annual increase in dollars? Why was that demand not there before?
It buys across treasuries, but it influences the short end the most. It also buys agency MBS’s. Anyway, I probably would spend more time understanding the drivers of currencies, rates, and central banks before I put a short dollar position on the book.
The drivers of central banks is easy. They desire full employment and target 2% inflation rate. They're like a broken record telling you this. Other central banks may have slightly different variables, but the idea is the same... Assuming it's an honest institution in that country. If you want to understand what drives currency prices, read "The Alchemy of Finance" by George Soros. He breaks it down to 8 variables I believe. I don't have the book with me to double-check. I should definitely re-read that part.