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Dollar moves indicate investors' dilemma

Investors might be facing a dilemma over, how to trade dollar, to go long or to go short.

Preliminary estimate on US second quarter GDP was released today, which showed that US economy is expected to grow by 2.3%, after contraction by -0.2% in the first quarter. However the number was quite below of 2.6%, median estimate according to economists.

Today's release and movement in EUR/USD exchange rate clearly exposed the dilemma.

Dollar was trading 1.094 against Euro, prior to the release and traded as high as 1.097 post release, since the data was below expectation. However Euro dropped to as low as 1.0925 within minutes and up again around 1.096 by next 15 minutes and then traded as low as 1.091 over the next hour and currently at 1.093.

Over the first look it just seems lot of volatility, which is not unusual given the data release and intraday nature but a closer look points that investors and traders just can't make up their mind over what to think of the GDP number.

This in turn means that even after so much of communication investors are just not sure about FED's reaction function and the fate of dollar, once the hike is actually done.

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