Fed Deliver a 50 basis point cut, with room to move

Currency Trading Summary

U.S. Dollar Trading (USD) saw the Federal Reserve cut rates by 50 basis points as widely expected as growing fears regarding a US recession remains. As a result the USD was pressured versus a number of majors as the lending rate now sits at 3%, confirming the fasting easing of monetary policy since 1990, totaling 1.25%. In U.S. share markets the NASDAQ was lower by -51.57 points (-0.57%) whilst the Dow Jones also closed lower by -37.47 points (-0.30%). Crude oil rose by US$0.43 a barrel to US$92.43. Looking ahead, Initial Jobless claims, and Core PCE the key pieces of data today.  

The Euro (EUR) traded at a two week high versus the dollar following the rate cut be the Fed. Overall the EURUSD traded with a low of 1.4755 and a high 1.4910 before closing the night 1.4880 in the New York session. Key data on Thursday includes the harmonized CPI and the Unemployment rate for the Euro zone. 

The Japanese Yen (JPY) was buoyed by views that the Carry trade is a thing of the past, with reports suggesting that investors should revert from using the Japanese Yen to fund High yielding Currencies. The yen has been the best-performing major currency this year, gaining 4 percent against the Dollar and 2.7 percent versus the Euro. Overall the USDJPY traded with a low of 106.30 and a high of 107.46 before closing the day at 106.39 in the New York session.

The Sterling (GBP) lost ground as more dire news from the UK housing sector put a halt to the rally in the pound that started at the end of last week. However the Fed 50bp cut caused the sterling to rally to 1.9940. Overall the GBPUSD traded with a low of 1.9850 and a high of 1.9960 before closing the day at 1.9914 in the New York session.

The Australian Dollar (AUD) rallied on the back of the Fed rate cut, as the RBA is expected to hike 25 bps next week, further widening the gap between the two currencies. Overall the AUDUSD traded with a low of 0.8862 and a high of 0.9014 before closing the day at 0.8958 in the New York session.

Gold (XAU) rose 1.8 per cent to a record $929.20 a troy ounce in late London trading, however was unable to break records reached on Monday. XAU traded with a low of 917.10 and a high of 927.70 during the New York session.
 

TECHNICAL COMMENTARY

Euro – 1.4835
Initial support at 1.4661 (Jan 25 low) followed by 1.4592 (Jan 24 low). Initial resistance is now located at 1.4799 (Jan 28 high) followed by 1.4859 (Jan 16 high).
 
Yen – 106.05
Initial support is located at 106.01 (Jan 28 low) followed by 104.97 (Jan 23 low). Initial resistance is now at 107.89 (Jan 25 high) followed by 107.95 (Jan 16 high)
 
Pound – 1.9865
Initial support at 1.9814 (Jan 29 low) followed by 1.9731 (Jan 28 low). Initial resistance is now at 1.9929 (Jan 29 high) followed by 2.0034 (38.2% retracement of 2.1161 to 1.9338 decline)
 
Australian Dollar – 0.8865
Initial support a 0.8768 (Jan 28 low) followed by 0.8691 (Jan 24 low). Initial resistance is now at 0.8907 (Jan 29 high) followed by 0.9022 (Jan 15 reaction high)
 
Gold – 926.00
Initial support at 908.10 (Jan 23 low) followed by 876.80 (Jan 23 high). Initial resistance is now at 933.30 (Jan 29 high) followed by 950.0 (Psychological round number)