In a move anticipated by most market analysts, the Federal Reserve cut target lending rates yesterday to a level not… … seen in almost 50 years!

This was done in an attempt to prevent a widening financial crisis from tipping the U.S. economy into a
prolonged recession. It was not the first time the Fed cut rates to stave off
further economic disaster during these most recent times of financial hardship.

Less than a month ago the Fed joined the European Central Bank (ECB), as well as
other counterparts from the U.K., Canada, Sweden and Switzerland, in a coordinated
reduction of interest rates, cutting its target rate by a half percentage point to
1.50%. Now, as a result of yesterday's further rate cut, the Dollar posted its
biggest one-day fall against almost all of its major currency counterparts.

The Dollar was already beginning to trade above $1.3200 per EUR in today's early
trading sessions, after dropping 2.2 % yesterday, and has also climbed above 1.6500
against the GBP. The Fed may also be expected to lower benchmark interest rates even
further in the coming months given the downbeat economic outlook provided by the
Fed's policy statement yesterday.

The market has been trading on a recovery theme lately; there is still a lot of
uncertainty, and risk aversion is very much in place. If risk appetite continues
improving, the Dollar may get even weaker. Despite showing signs of recession in the
U.S. economy, the Fed's maneuver put the focus on the interest rate differential,
and that might force the Dollar to go even lower no matter how the Advanced GDP
figures appear when they are released later today.

* EUR
EUR Finds its Strength from Weakened USD
The EUR rose against the Dollar to 1.3200, marking a distinct rebound from last
week's doldrums. The 15-nation currency rallied after the U.S. Federal Reserve
slashed its target rates by half a percentage point yesterday and also left the door
open to further reductions if needed. The EUR made further gains following Germany's
announcement of its preparation of an economic stimulus package. Deutsch Bank AG,
the largest bank in Germany, also declared surprising profits after implementing a
change to its accounting rules.

The USD no longer appears to be a save-haven for traders after the Federal Reserve
released a statement that the pace of economic activity appears to have slowed
significantly. The British Pound has also advanced against the Dollar as a report
showed that mortgage approvals rose for the first time since June 2007.

The Bank of England (BoE) said lenders approved 1,000 more home loans last month
than in August, and the government is expected to pledge extra borrowing today to
support the economy as it enters its first recession since 1992. The Pound had its
biggest intra-day decline versus the Dollar on Oct. 24, when a government report
showed the economy contracted in the 3rd quarter by more than twice as much as
economists predicted. This indicates that economic news is beginning to once again
have a larger impact on the movement of the major currencies.

While appearing to gain strength recently, the EUR may in fact see a reversal to
yesterday's giant upswing. News being released from the Euro-Zone today will likely
show higher-than-expected unemployment in Germany and decreased consumer confidence
throughout the region. While indicators have had less impact these past weeks due to
the financial crisis, they nevertheless still carry weight in the confidence of
investors; any negative economic data will have the potential to cause harm to the
currency's value.

* JPY
JPY's Excessive Volatility Ending as Japan Considers Cutting Interest Rates
As the market's speculation increases that the Bank of Japan (BoJ) will lower its
interest rates, the Yen fell for a second day against its currency counterparts,
extending its largest ever decline. The first motivation for a potential rate cut is
to stem the Yen's appreciation; another motivation is to try to prop up the economy.

Yesterday, Japan's currency dropped 0.5% versus the pound to 156.47 on speculation
investors will revive carry trades. In carry trades, investors borrow in currencies
with low interest rates and invest in currencies with a higher yield. Japan's target
rate of 0.5% is the lowest among major economies. The potential BoJ rate cut led to
an unwinding of safe-haven flows to the JPY. Perhaps what has been driving the Yen
to its recent strength is not speculation, but the repatriation of Japanese
investors and de-leveraging by global investors.

The Group of Seven (G7) issued an unscheduled statement on Oct. 27 saying it was
concerned about “the recent excessive volatility” in the JPY. The Japanese
government has also stated that it may intervene in foreign exchange markets by
arranging purchases and sales of currencies, if necessary.

* Oil
Crude Oil Prices Climb after USD Takes a Hit
Crude Oil prices gained almost 9% yesterday as the Dollar posted its biggest one-day
drop following the U.S. interest rate cut. Crude Oil prices surged to almost $69 a
barrel as the weak Dollar and data from the U.S. government showed crude stocks rose
less than expected last week and gasoline supplies fell unexpectedly.

The prices appreciated on speculation the U.S. Federal Reserve rate cut will help
spur a recovery in the world's biggest fuel-consuming country. Investors often
purchase Crude Oil, and other dollar-priced commodities, when the U.S. currency
drops because of their use as an inflationary hedge. Like other commodities, Oil has
become more sensitive to the gyrations of the wider economy as the global financial
crisis widens. Moreover, the OPEC cartel decision last week to cut output by 1.5
million barrels per day, as well as hints that it may cut production further, have
also helped to stabilize Crude Oil prices in the market.

Technical News
* EUR/USD
The pair continues to make bullish sounds, and is currently testing the 1.3200
level. However, it appears that the 1.3250 level has now become a strong resistance
level, and a breach of that level might validate the continuation of the upward
move.

* GBP/USD
There is a very accurate bullish channel forming on the 4-hour chart as the cable is
now floating in the middle of it. The RSI on the daily chart has crossed the 30
line, and the Slow Stochastic is still pointing up, all suggesting that another
bullish session is pending. Going long appears to be the right choice today.

* USD/JPY
Ever since bottoming at the 91.00 level, the pair has entered a very strong bullish
trend and is currently traded around the 98.70 level. And now, a flag formation on
the 4-hour chart suggests that the bullish move has more room to go.

* USD/CHF
A very sharp bearish movement took place yesterday, as the pair dropped over 300
pips. The current price is floating beneath the Bollinger Bands lower border,
indicating that the bearish move is still quite strong. Going short appears to be
the right strategy today.

The Wild Card
* Gold
Gold prices are appreciating on a daily basis lately, and an ounce of gold is
currently valued at $770. And now, all oscillators on the daily chart are pointing
up, implying that the bullish momentum has more steam in it. This might be a great
opportunity for
forex traders to join a very popular trend.

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