In Forex and Futures Commentary

The US cut another 50bps off of its interest rate today, and sent equities skyrocketing, and the dollar down the drain. Risk-related pairs went through the roof, many of them coming up to the halfway mark on the already dramatic monthly bars. Eyes are now focused on GBP and EUR, and looking for them to fall in line with further cuts as well.

All correlations we have been used to during this credit debacle stuck like glue today, but this time in reverse. As the equity markets rallied, currency pairs did the same, and USD took a massive hit today and is currently being corrected this morning.
Of all the moves today, USD/CAD took one of the nastiest falls we have in a long time (if ever), and all of the impulsive buying we have been seeing in this uptrend got nailed into the ground today. The monthly bar on CAD is something like we have never seen before, and now that price has pulled back so much, I’m hesitant to play any further breaks to the short side, but rather wait for pullbacks to sell.

The Dollar Index

The Dollar Index has pulled back substantially in the past two days and is now looking at good support around 83.30. I would expect a minor correction (upwards) before that gets seen. I would look to sell the dollar on any retracements on a move back to that area.

Gold

As the dollar sells off, Gold rallies, and is now looking at 786.4 as the next big area of resistance, something which I would be more inclined to buy a breakout of rather than sell.

Bottom Line:

I’m looking for longs at favorable levels on EUR/USD, GBP/USD, etc., once this correction has fatigued. Conversely, if we see any impulsive moves to the upside early on today indicating trend continuation, I am likely to buy into them. If we go dramatically higher on these pairs, shorts are in play for me, as rate cuts on GBP and EUR are still in sight. Rate cuts on these pairs are not likely to have the same impact, in reverse, as the US cut did today, however. Nowadays, the focus is on growth, and any cuts by the BOE and ECB are, of course, intended to stimulate this. Immediate reactions are one thing, but I don’t believe over the long haul. Growth is the focus. If they can’t keep up to speed with the US, however, they’ll of course drop once again.

Levels:

EUR has buys at 1.3000, 1.2975, 1.2815, sells at 1.3360, 1.3530, 1.3685
GBP has sells at 1.6830, 1.7105, 1.6950, 1.7200 buys at 1.6350, 1.6270, 1.6110-06, 1.5940
CHF has sells at 1.1433, 1.5000-1.1516, 1.1650, buys at 1.1130, 1.1000-1.1090, 1.0930
JPY has sells at 100.50, 101.35, 102.40, 103.00, buys at 97.25, 96.15, 94.90, 94.25

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