FOMC outlook:
Today at 2:15 the fed will announce its decision to cut rates. The majority of the analysts believe The Fed will cut a half a basis point bringing the rate to a level it has not seen since May of 2005. If the Fed cuts rates by half a point I believe we will see slight dollar weekness. This will likely push the majors up against the dollar however I believe this push will be temporary.
In the case of the EUR/USD I expect the ECB will intervine once the EUR/USD gets around 1.50. It may squeeze past it a bit in an effort to clear stops but that should provide for a good top so for those building a short position that will provide a good area to add.
The USD/CHF tends to move converse of the EUR/USD so we will expect the USD/CHF to move down if the Fed cuts by a half a point. This will likely provide a push down to the former lows of 1.835. If the ECB does intervene on the EUR we will likely see the affects of this on the USD/CHF as well do to there close corrolation.
The AUD/USD and NZD/USD are very closely corrolated at times. Recently we have seen closer than normal corroloation between them mainly do to there ever increasing tie to commodities. We may see the NZD/USD revisit the highs .7931 and possibly squeeze past in an attemp to run stops. I believe this will give large traders an opportunity to sell the pair at a good price. The AUD/USD currently at key resistance .8909 however I believe a cut will break resistance and run the AUD up to around .8953-73
I believe in all of the above cases if the Fed cuts a half a point the move will be short term and provide better entries for an opposite move from the levels posted above. If the fed only cuts a quarter point or keeps rates unchanged I believe we will see dollar strength in which case the EUR/USD AUD/USD, NZD/USD will all move down and we will see the USD/CHF move up.
If either of those situations occur than this could be the beginning of the next dollar run. Just remember to be patient and keep your leverage reasonable.
Dustin
