The bond market is arguing with the Federal Reserve, as the Fed may have made a policy mistake with that 50 basis point cut. This is a situation where people are chasing the biggest yield, something that people thought was leaving from the United States.

EUR/USD – Technical Analysis

The euro has plummeted again and now is below the recent support level in the form of the 1.08 level as interest rates in America continue to climb. Because of this, I think you’ve got a situation where traders are going to continue to run to the US dollar, and therefore I think we will probably continue to drop. I was a bit surprised that we didn’t consolidate a bit longer, but clearly the bond market is starting to lead the charge. At this point, it would not surprise me at all to see a drop down to the 1.07 level, and then possibly even 1.0650. I have no interest in buying this pair, at least not at the moment.

USD/JPY – Technical Analysis

The US dollar of course has taken off against the Japanese yen and is threatening 153 yen at the time of recording. The market has gone parabolic and now it looks as if it is going to try to get to the 155 yen level. That being said, we are stretched and there is a significant cluster of noise somewhere around the 154 yen level. So, I do think you’ve got a situation where you need to be a little cautious here about jumping into the market and chasing this move.

If you are already long of the U S dollar against the Japanese yen, and you should be if you’ve been following my analysis now, it just comes down to deciding whether to take profit or to move your stop loss up to lock in profit. Quite frankly, we do have further to go, but I also recognize that we are getting a little bit overdone in the short term.

AUD/USD – Technical Analysis

The Australian dollar has broken below the 0.6650 level, and it now looks as if it could really start to break down, especially if we give up the 0.6620 level. Anything below there could very well have the Australian dollar plummeting towards the 0.6450 level. As things stand right now, the Australian dollar is probably the best of the three currencies against the US dollar in this video.

But that’s speaking in a relative manner. I would not get long here, as there are far too many issues out there that could cause a bit of concern, and of course the Asian economies will have an outsized influence on how the Aussie dollar plays out at this point in time.