No More Rate Cuts After Today
It is expected that the Federal Reserve will make a quarter percent rate cut today, however, comments suggest that it’s unlikely that there will be further interest rate cuts after this spate of emergency cutting measures.
The US dollar is set to make its highest monthly gain against the euro since April 2004 by trading as low as $1.5550 per euro.
“There’s a general sense developing in the market that the Fed might have done enough. People are starting to look for a better time ahead. I’m increasingly optimistic we’ve seen the lows for the year and the dollar is bottoming out.” said Peter Lucas, a global-investment strategist at Ashburton Ltd. - Bloomberg
The US dollar has risen 6.5 percent against the euro this month, but is still down against the euro by 6.5 percent so far in 2008. A survey of analysts carried out by Bloomberg shows that experts believe the us dollar will trade at $1.58 by the end of June, and make gains against the euro by the end of the year, reaching $1.49.
Technical Chart: EURUSD 1-hour
From the 1-hour chart for the EURUSD we can see the recent dollar gains, marked by the strong down-trend. The price action is presently moving within a downwards channel.
Notice the divergence on the stochastic. We have a line showing the stochastic reached higher highs, however, this is not seen on the chart - instead we have seen lower highs as the trend runs out of momentum. This signals a bullish divergence, indicating that we may see the euro strengthen against the dollar in the near future. This would give us a long position signal.
The $1.5640 region is at the 23.6% Fibonacci line, this could well give an indication for profit taking if the euro does recover against the dollar. Presently, with the down-trend, we would need a good level of confirmation to go long. Notice the price action is moving below the 20-day moving average and the 55-day moving average.
A break-through of the 23.6% Fibonacci line may signal an end of trend situation and we may see at least a partial recovery for the euro.
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