Ben Bernanke and Co. are meeting Tuesday to discuss the economy and where interest rates should be. Everyone is now anticipating a 25 bps cut after the strong employment report on Friday. As a result, Forex markets have been vey quiet as every trader and bank waits to see which way rates will go. I believe that the subprime mess and Real Estate recession will force the Fed to lower rates to 3.5% before its over. Lower rates equal more inflation and a further erosion of the US Dollar.
Its very dangerous to navigate the currency markets right now and I’m debating doing nothing or taking a small position in EURUSD. EURUSD seems to move violently on Fed days but it does come with its rewards if you read the economy right. The beating you get goes without saying if you read the economy wrong.
A quick scan of the currency markets reveals that the US Dollar is strengthening against the Yen, the Yen remains weak today (bear trend still in place), and all other major pairs seem to be in a holding pattern.
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