Forexpros daily analysis

All the major pairs fell through key support levels for the second day after traders chose to sell theGreenback with both hands after yesterday’s larger than expected interest rate cutby the FOMC . A larger than expected production cut by the OPEC members failed toinspire Crude Oil to rally lending support to the argument that energy prices willdecline further lending some support for an economic recovery but analysts remindthat is a minor issue against the size of the economic crisis; most likely theinterest rate cut putting the USD as the worlds cheapest currency will outweigh arise or drop in commodities prices. For the most part the USD fell to two-month lowsor more against the majors today and more losses are expected as traders adjust tozero-cost of money and how that will fuel growth and inflation. GBP high printovernight at 1.5725 went unchallenged in New York today as the rate struggled tofollow EURO higher; low prints at 1.5243 making for nearly a 500 point range on theday. EURO rallied again blowing through expected resistance areas for a high printat 1.4438 almost matching the range seen in GBP with a low print at 1.3997; the ratehas now put on more than 20 full handles between current prices and the lows ofOctober. The volatility is huge and traders remind that stops have been one of thebig drivers the past two days suggesting that shorts have been effectivelyeliminated from the markets. USD/JPY failed to hold the previous lows at 88.10 areafor a low print at 87.12 finding stops in size under the previous lows; traders notethat official interest on the bid was seen as well as the unusual step of the BOJchecking rates. Some analysts suggest that a possible coordinated intervention tostop the Yen’s rise could be in the works but I would find that highly unlikely asthe BOJ hasn’t intervened since 2004 and conditions are worse now for them. USD/CHFsmashed support for a low print at 1.0745 and closes within 20 pips of the lowsuggesting that money is going into Gold; gold prices were sharply higher in Gold aswell today. Traders note that lows today in Swissy are nowhere near support levelsthat were expected to offer a bounce and with the speed of the move no one iswilling to get on the buy side just yet; prices could be much lower to end the year.USD/CAD low prints at 1.1930 were no surprise but the rate has lagged the speed ofthe decline seen elsewhere suggesting that the rate may behave more rationallynear-term. In my view, panic was the rule today and traders will likely come totheir senses by the end of the year. The USD is now getting back to more realisticprice levels given the conditions of the economy; a return to lower prices for theUSD is coming but it needs to be organized a bit better. I think the panic needs tosubside and then more reasonable two-way action will result.