Forex - Federal Reserve cut rate to a range of 0% to 0.25%

Forex News and Events: The Dollar dived against the Euro and the Yen on Tuesday after the Federal Reserve cut its benchmark interest rates more than expected to a record low, further diminishing the appeal of the Dollar. The Fed cut its federal funds rate target to a range of 0% to 0.25% from the previous target of 1%, and said it would use "all available tools" to dispel a year-long recession. Financial markets had expected the Fed to lower rates by no more than 75bp. Yesterday, EurUsd was up 2.71% at 1.4099 having posted 1.4148 high. UsdChf dropped 3.29% at 1.1200. UsdJpy was 2.03% lower to 88.69. GbpUsd rose 1.86% to 1.5582. The Dollar also dropped against the Australian and New Zealand dollars in a sign the Fed's move may be positive for risk appetite and riskier assets. AudUsd rose 3.81% to 0.6941 while NzdUsd rose 4.33% to 0.5785. The Fed's rate cut pushed the fed funds target to its lowest level on record, and the central bank said it would keep it at "exceptionally low levels for some time." The surprise move put the Fed in unprecedented policy territory, but analysts mostly approved of the move. US stocks rallied after the announcement. US data released earlier on Tuesday showed new housing starts and permits plunged to record lows in November, while consumer prices dropped at a record rate for a second straight month. Analysts and fund managers said the very soft readings on inflation and continued deterioration in the housing sector support views of a very expansionary policy stance.

Today's Key Issues (time in GMT): 07:00 EUR November German CPI final -0.5% vs -0.2% (mom) 07:00 EUR November German CPI final 1.4% vs 2.4% (yoy) 09:30 GBP October Claimant count unemployment 45 vs 36.5k 09:30 GBP October ILO unemployment rate 6% vs 5.8% 10:00 EUR November Euro zone Inflation ex-food 0.1% vs 0.4% (mom) 10:00 EUR November Euro zone Inflation ex-food 2.2% vs 2.4% (yoy) 10:00 EUR November Euro zone Inflation final -0.5% vs 0% (mom) 10:00 EUR November Euro zone Inflation final 2.1% vs 3.2% (yoy) 11:00 GBP December CBI distributive trades -41 vs -46 13:00 NOK Norges Bank rate decision 3.75% vs 4.75% 13:30 USD Q3 Current account -$178.9b vs -$183.1 13:30 CAD October Wholesale trade 0% vs 1.5% (mom)

The Risk Today: EurUsd Market rose for the 7th day in a row and traded as high as 1.4148. On the further upside, room is open for 1.4867 23rd October high. A return over 1.5000 will confirm release of the 3-month pressure and may put key resistance 1.6000 into focus. On the downside, 1.3899 and 1.3600, former resistances, hold supports. Further support holds 1.2208 trendline support. Next long-term support holds 1.1640 November 2005 low and therefore 1.0739 September 2003 low. GbpUsd Market traded over 1.5458 former resistance (23.6% retracement of 1.8669-1.4471 decline) and might look for 1.6673 30th October high strong resistance. Further strength may open the way to 1.6075 (38.2% retracement of 1.8669 – 1.4471 decline) and even 1.6570 (50% retracement). Further resistance holds 1.7816 (50% retracement of 2.1161-1.4471 decline). On the downside, former resistance 1.5462 holds support). Strong supports hold 1.4471 December low ahead of 1.3682 March 2001 low. UsdJpy UsdJpy was heavily under pressure for the last 4 days trading as low as 88.35 last Friday and 88.63 yesterday. This may hold initial support. Further downtrend may open 79.70 April 1995 low. On the upside, strong resistance holds 100 pivot point, but only a recovery over 103 upper trendline and 105 pivot point will put focus again on 108 and 110.67 15th August high. Initial resistance holds 93.91 ahead of 97.43 24th November high. UsdChf Market traded down to 1.1144 yesterday in 7 days downtrend. Further weakness may open the way down to 1.0969 (50% retracement of 0.9639 – 1.2298 advance), which would strongly undermine the March-November uptrend and reverse through 1.0692 22nd September low and down to 1.0500 and 1.0375. Such a move may look for 1.0013 15th July low in front of 0.9637 17th March low. Renewed up and over 1.2298, 21st November high, strength may look for 1.2463 strong resistance ahead of 1.2506 (61.8% retracement of 1.4278 – 0.9639 decline).

Resistance and Support: EURUSD GBPUSD USDJPY USDCHF 1.5000 S 1.7080 S 103.07 T 1.2506 S 1.8670 S 1.6570 S 100.00 P 1.2470 T 1.4148 M 1.5649 M 97.43 M 1.2298 M 1.4115 1.5595 88.45 1.1155 1.3899 M 1.5462 M 88.35 M 1.0969 S 1.2430 T 1.4042 S 85.00 P 1.0692 S 1.1640 T 1.3682 T 79.70 T 1.0500 K S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot