The US Federal Reserve yesterday raised the discount rate by 25 basis points to 0.75%. The unscheduled move announced 29 minutes after the US markets closed raised the question as to why this decision was made after the Fed clearly stated there were to be no changes in the monetary policy for now. The answer to this question is the need right now to narrow the gap between the FED Funds and the Discount.

Following the Fed decision, the US dollar index spiked to 81.10, breaking above it's 6 month high of June 2009. This resulted in the Euro and British Pound dropping significantly. Cable reached our daily target of 1.5550 and 1.5500 as well as our weekly target of 1.5370. The Euro reached our daily target of 1.3550 and 1.3500 and we are now looking at a target of 1.3430 in the next few hours. USDCHF reached our daily target at 1.0800 and 1.0850, as did AUDUSD which dropped reaching yesterday's daily target of 0.8915.

There is a need right now to be cautious in trading. I am still expecting the dollar index to continue this bullish wave for the next few hours especially during today's US session, which I think may bring new lows in most US Dollar currency pairs and equities.

The targets that am looking for now are as follows, cable looking for 1.5310, EURUSD looking for 1.3440, USDCHF looking for 1.0930, AUDUSD looking for 0.8835 and finally Gold is looking to reach 1110 and 1090.