I was somewhat shocked by the 50 basis point cut in rates. I didn't expect the Federal Reserve to be so swift and aggressive in cutting rates. I thought 5.25% was still in neutral territory. I don't think the U.S. economy is as bad off as the market thinks. I still maintain that it's just going through a soft patch. Today's jobless claims were lower than expected and the Philadelphia Fed survey results were better than expected. Right now, I expect the U.S. economy to stagnate (grow moderately) for the next year or so as it works its way through the subprime mess. With the baby boom generation retiring, I expect non-farm payroll growth to remain low but do not expect the unemployment rate to rise significantly.
Before the FOMC decision, I went long the AUD/CAD @ 0.8540. Since then, I moved the stop to 0.8560 and am currently up 100 pips. I am vulnerable to being stopped out but am more concerned about preventing losses right not. The charts and this technical article
AUD/CAD: Ready to Explode Higher help justify my position. Today, I went long the U.S. Dollar against the Swiss Franc @ 1.1710 with a stop at 1.1660 and a limit @ 1.1760 in expectations of profit taking behavior to buoy the pair a little going into the weekend. In retrospect, a better and faster trade would have been a long USD/JPY.
