Market Moving News: GBP/USD - Oct 7 GBP/USD Fundamental Outlook at 1500 GMT (EST + 0500) Chart of the Day - 10/06/2008 - GBP/USD More GBP/USD USD/CHF - Dollar Swiss Franc, American Session - 06/10/08 USD/CHF - Dollar Swiss Franc, European Session - 06/10/08 Chart of the Day - 10/03/2008 - USD/CHF More USD/CHF Forex and Dow Jones recommended levels Market Moving News: USD/JPY - Oct 7 USD/JPY - 101.67 Daily Market Outlook - Oct 6 More USD/JPY

The Euro plunged after Fed Chairman Bernanke said the central bank is "attentive" to the level of the U.S. Dollar.

Traders immediately read this as a sign that the Fed is through cutting interest rates. The Fed Chairman, who rarely comments on matters regarding the Dollar, also commented that the Fed is aware of the effect a weaker Dollar has on rising crude oil prices and inflation. The Chairman also emphasized that the Fed is working with the Treasury on this matter. Earlier this week Treasury Secretary Henry Paulson made a statement backing a stronger Dollar.

Tuesday was a significant day as far as the direction of the Dollar is concerned. The news is clear that the Fed is aware of the relationship between inflation and the Dollar, and is prepared to act accordingly should inflation start to get out of control.

Large traders seem to have known this for over a month as there have been reports that large hedge funds have been on the long side of the Dollar. Dollar futures have also seen a shift to net long in the Commitment of Traders Report.

Technically, a new main top was formed at 1.5627. The market also broke a pair of up trending support angles at 1.5473 and 1.5449. This action indicates weakness and a possible further decline to the main bottom at 1.5283 and another up trending support angle at 1.5277. Look for resistance at 1.5578.

The European Central Bank meets on June 5. Traders are expecting the ECB to keep rates at 4%. Although the Fed's comments should attract more selling, trading may become more subdued until after the ECB's meeting. In addition, lower yields in U.S. Treasuries may also curtail some of the downside activity.

USD/JPY in Position to Resume Uptrend

The USD/JPY found support at a key 50% level and rallied sharply higher, putting it in a position to challenge the recent top at 105.88. A breakout over this level is likely to trigger an even further rally to 107.51.

Fundamentally, the signals are mixed. The Fed's comments provided the support and the power to drive this pair higher, but the weakening stock market prevented more of a rally due to cost of carry liquidation. Look for the Fed's comments to prevail over the long run.

With the main trend up, look to be a buyer as long as the market stays above 104.97.