Further Fed Rate Cut Expected

Posted by Rob

February 19, 2008

The US dollar fell against Euro on speculation of a further Federal Reserve benchmark rate cut tomorrow.

The USD fell to $1.4736 at 10:35 am (EST), a fall of 78 points from yesterdays figure of $1.4658 yesterday.

Some experts are predicting a largely doveish outlook for the USD. Kenichiro Fujita of Aozora Bank LTD in Tokyo said “The Fed will cut rates to 2 percent to support the economy and to avoid criticism that it always falls behind the curve.” - Bloomberg

A Look At The Chart

From the chart we can see that the price action of Euro-USD is moving in line with the 20-day moving average. The price action is also well above the 55-day moving average.

However, the stochastic shows some negative divergence which suggests a weakening trend. Although today the USD has made losses against the Euro, the chart would suggest a weakening trend.

With important US Housing figures and potential interest rate cuts the consensus would be further USD weakness in coming days, with traders selling the EUR-USD currency pair for Euro profits.

This shows how important it is to analyse the technicals as well as upcoming fundamentals. Rather than looking for a turn-around, patience is needed to see which direction this pair takes with tomorrows announcements. Expect Euro profits.

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