Deeper rate cuts, slowing growth prospects in the USA hurting USD and CAD; supporting EUR, JPY and AUD

Federal Reserve Chairman Ben S. Bernanke signaled he has resolved months of debate over the competing risks of slower growth and faster inflation, and is ready to make deeper interest-rate cuts.

Bernanke yesterday pledged ``substantive additional action'' to insure against ``downside risks'' to the six-year economic expansion. His remarks in a Washington speech led HSBC Securities USA Inc. and Morgan Stanley to predict the Fed will reduce its benchmark rate by half a percentage point this month, up from their previous forecast of a quarter point.

ECB and BoE left their respective interest rates unchanged this week.The hawkish tone remained for the ECB, however, it's not the case for the BoE, hence the pound has been disconnceted from the euro's rise, as usually has been the case in the past.

Canada's dollar fell for a sixth day, its longest slide since March, as the economy's unexpected loss of jobs in December bolstered speculation the U.S. slump is hurting Canada. The economy lost 18,700 jobs last month after creating 42,600 positions in November, Statistics Canada said Friday.

It worth noting that gold prices catapulted and reached the forecasted $900/ounce, oil prices still hovering near $100 per barrel, the Canadian dollar was not able to capitalize on that.

TECHNICAL OUTLOOK – DAILY CHARTS

EUR/USD – new hope for 1.5000+?

Resistance: 1.4965

Support: 1.4570

Sentiment: bullish

GBP/USD – lagging behind the euro

Resistance: 1.9830

Support: 1.9330

Sentiment: mixed w. bearish bias

USD/JPY – at crossroads

Resistance: 110.45

Support: 107.20

Sentiment: bearish

USD/CAD – disconnect from commodities!

Resistance: 1.0500

Support: 1.0000

Sentiment: bullish

AUDUSD

Resistance: 0.9070

Support: 0.8800

Sentiment: bullish

USDINX (USD INDEX)
Resistance:76.1800, 76.5150
Support: 75.4200
Sentiment: mildly bearish