The clear signal from Chairman Bernanke of the Fed’s intention to combat recession through additional interest rate cuts rallied the U.S. dollar against most major currencies during the latter half of this forex trading week. It’s an odd logic that has lower interest rates strengthening the USD; however, emotions in the market remain volatile and another trading meltdown is possible.

Australian elections are past and Labour has won, however, the economy is still booming and inflation pressures remain high. Under these circumstances the RBA would generally raise interest rates, but as several major banks have signalled an intention to tighten their own credit the RBA is expected to hold steady.

The AUD/USD is currently rangebound between 0.8680 and 0.8900. Momentum has dropped and RSI is around 50 on all charts, signalling indecision to mirror the multiple doji on the hourly chart. The daily pivot point is 0.8843; first resistance is 0.8881 followed by 0.8932; first support is 0.8792 followed by 0.8754, a key support level respected multiple times in the first half of November although broken 21–28 November.

The U.S. housing correction continues with prices declining even in California and Florida. The underlying economy is slowing but still going, as surprisingly high real Q3 GDP growth of 4.9% has demonstrated. The USD rallied even against the traditional safe-harbor currencies, the Swiss franc and Japanese yen, scoring 2.7% off each this week.

The Eurozone economy is also slowing and inflation pressure is rising. The ECB cannot afford to raise interest rates against the global credit crunch and are therefore expected to hold steady. The EUR/USD has turned south and will need to consolidate after the dollar’s appreciation of 1.4% in this last week. The daily pivot point is 1.4681; first resistance is 1.4733 followed by 1.4835; first support is 1.4579 followed by 1.4527.

As opposed to the ECB, the Bank of England is expected to cut rates as U.K. housing numbers are also slumping, possibly as early as December although early 2008 is also possible. The forex trading market is already pricing in the cut. The daily pivot point for GBP/USD is 2.0595, an important support point respected several times during this past week; first resistance is at 2.0658 followed by 2.0760; first support is at 2.0493 followed by 2.0430.

Canada’s dollar returned to parity with USD. The BoC is almost forced to lower their interest rates in sympathy with the Fed, to ease the constriction in Canada’s export numbers, although the Canadian economy is otherwise sound. Although volatility remains low, all momentum shown by the MACD is on the upside. The USD/CAD remains bullish, with the pivot point at 0.9979; first resistance is at 1.0037 followed by 1.0075; first support is at 0.9941 followed by 0.9883.

With so many interest rate announcements this coming week and the next, the market is bound to be volatile. As trading institutions close their books for the year, the forex trading market grows less liquid and technical analysis less accurate. This next week shall be interesting on many levels.