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Very important news about 3 hours ago, the Federal Reserve has raised the discount rate by 25 basis points. This is a big surprise to the market and the dollar has since rallied by 150 pips vs. the euro, finding short term support at 1.3450. Not sure what to make of the move as it happened late US session. Well see if Tokyo and London continues to pressure the dollar for more gains. Todays economic data will be of interest as well, well be hosting a News! Trading session today, trading the US CPI release along with Canadian Retail Sales data (February 19th, at 1330 GMT/830am EST).
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As we expected, the dollar continued gaining ground against the majors. As we reported yesterday, the breakout last week had no momentum and the reversal late last week signaled for further dollar strength. Will it continue? Thats the magic question. We think so. There is a lot of global uncertainty and we think the dollar will benefit from it as it did during the first crisis 2 years ago. We dont know how quickly or how long the dollar appreciation will last, but on the longer term charts, we may have seen the bottom for the buck, and from here, the technicals look good. We may still see some retracement throughout the year, however, our longer term prediction is the dollar will be strengthen and close higher at the end of 2010. We know this is still a long time from now, so take it with a grain of salt; we analyze the market on a daily level; however, technicals look good and we are now dollar bulls even though we dont like the sound of that. As you may know, weve been pretty dovish on the dollar, and there are still many variables that may change our position, but we want to point out that the technicals look good for the dollar to recover throughout 2010.
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