The Fed. did surprise the investment world with its .50 rate cut last week. The reason we are in the mess we are in is low interest rates, so could someone please explain to me how lowering rates is going to fix this problem? The FOMC is supposed to be primarily concerned with inflation. Gold near all time highs, oil at all time highs, wheat at all time highs, and yet our government reports that inflation is not a problem!? What ever they are smoking up there on the hill must be good because you really have to have your head in the clouds to argue that inflation is not a problem.
This rate cut by the FOMC is just more evidence that they are nothing more than a lap dog to big business. This rate cut was a direct gift to Countywide financial and many of the other big sub-prime lenders. By lowering rates all they have done is stoke the fires of inflation to the point where they will soon be forced to raise rates in a hurry to try and slow what has already become run away inflation. Those who don’t learn from the past are doomed to repeat it…
Euro, Pound, Swiss Franc
The Euro continues to push to new highs against the Dollar. We do in fact expect this current rally to stall this week. We see the market beginning to form a new bull flag that should point to a continuation of this uptrend later in the fall.
The cable has been slower to react to the weakening Dollar than the Euro. Our models, show that this is about to change. We see this pair pushing above 204 this week on its way to a test of the July highs above 206. Buy any dips below 202 and hold on.
This pair has been moving lower as the Dollar weekend. We see this market beginning to stage a bounce this week. The market did already move lower than we expected, but we feel that light long trades with stops below Friday’s low should be a worthwhile trade this week.
Yen, Australian Dollar
The Yen did breakout out above 115.55 but failed to follow through. We see this market continuing to drift sideways between 114 -116 for the week ahead.
The Aussie went through our target from last week at .8600 and remains strong. At this point we do feel that a test of the old highs above .8850 is in the cards. Do not chase this market though as it has a tendency to stage sharp and fast breaks. If we do see one of those breaks, use it as a buy the dip opportunity.
I must admit to being wrong last week in not expecting the Canadian to hit parity. While we did expect this to happen we were surprised that it has happened this soon. We do see a bounce this week that could be used to reposition short trades as looking ahead a few weeks we do see this pair continuing to move lower after the coming bounce. Longs with stops below Friday’s lows should do well this week.
by Derek Frey
Odom & Frey
Call us at 1-866-636-6378