In a message delivered on Thursday the President of the U.S. declared that banks will no longer be able to service, own, and run separate hedge funds, nor hold real estate investment vehicles that are reliant upon funding that is not free and clear. The response has been a staggering drop in global equity trade, with all main futures exchanges dropping upwards of 2% in midday trade. The commodity pairs have absorbed the dollar buying, Usd/Jpy has absorbed heavy dollar selling, and the European based pairs have held steady.

In Wall Street trade on Thursday, the dollar has found buyers, but today it is not out of a desire to buy into the U.S. growth story; this move is all about the move to the relative safety of U.S. Treasury notes. Equity markets have been raped and pillaged by the XLF, the Exchange Traded Fund for the financial sector, as the U.S. President’s 11:45 EST speech in regard to reform bills on financial trading gets absorbed.

Asian markets still have to take into account this move, and the currency market may retrace some of the ground lost in Wall Street trade. It will be interesting to observe the reaction coming from other countries over the next few days, if they support these decisions taken by the U.S. government. Most investors are now waiting for a reaction from EU officials. A similar decision regarding bank’s trading branches has the potential to send the market into a new wave of risk-aversion, continuing the wave of dollar-long orders.

Dollar Index Technical View: TheLFB Member Charts

Daily chart trend: Mixed. Main price points: 74.19, and 76.82. Looking for: A Long wave I/ A

Prices on the dollar index reached new lows around the 74.00 zone where the trend quickly reversed at the end of 2009. Traders can look for a move higher in the mid-term away from an ending diagonal pattern shown in wave V) position as the prices have broken through the upper resistance line of an ending diagonal pattern.

If the wave count is correct then the market should trade higher over the coming weeks and months, with a three wave move (red I/A-II/B-III/C ) towards the 81 region.

The euro (Eur/Usd 1.4105) 4 hour trend is short and continues to favor Eur/Usd short plays. The euro was the weakest pair over the last few days of trading, but interestingly, throughout the U.S. session it managed to retrace every pip lost earlier in the day. Right now, it iis the only pair that managed to hold that kind of move. Favor a straddle.

The pound (Gbp/Usd 1.6210) 4 hour trend is long. Cable dropped as much as 170 pips during the overnight session, but managed to retrace almost half of those declines. The uptrend came only after it bounced from the 1.6100 area, which is protected by the 20 and the 200-day moving averages. Over the next few days of trading, the market may want to re-test these two important moving averages. Favor a straddle.

Aussie (Aud/Usd 0.9050) 4 hour trend is long. Aussie is trading in an area that is packed with important price levels. Within 100-pips, the aussie has the 20,50 and the 100-day moving averages. Each of these SMAs are likely to play an important role over the next few intra-day session. Favor a straddle.

The cad (Usd/Cad 1.0495) 4 hour trend is neutral. Usd/Cad is trading just above the 50-day moving average, in the 1.0500 area. Since early November, the 1.0500 area acted as the main swing point for the pair. A break above this level could favor long Usd/Cad plays, mainly targeting the 1.0730 area.

The swissy (Usd/Chf 1.0415) 4 hour trend is neutral. Usd/Chf tested the 1.0500 area in Thursday trade, the highest level reached since September 09. However, the market retraced the entire uptrend, and now the swissy is forming a bearish pin-bar formation on the daily chart. The technical view is for the swissy to be able to push above the 1.0500 area, but the pair is looking overbought in intra-day trade. Favor a straddle near-term.

The yen (Usd/Jpy 90.30) The 4 hour trend is short on Usd/Jpy. The pair had a very active U.S. session, in which it lost as much as 150 pips in just a short period of time. This selling is a consequence of the market’s risk aversion phase, which empowers the low yielding currencies: in our case, the Japanese yen and the U.S. dollar. Eur/Jpy and Gbp/Jpy are below all of the daily chart SMA areas. E/J is trading at the support area of the last 9 months of trading

Yen Technical View: TheLFB Member Charts

Daily chart trend: Long. Main price points: 84.80. Looking for: A Long, wave 1)

Recent trade saw the market bounce powerfully from the 84.80 area where the wave C) low of a larger short (Y), of a complex black wave 5 pattern, was completed. Technical traders should focus on long Usd-Jpy positions in the medium term since the long-term bear market has been reversed.

Currently, the market is trading in an impulse Long, red wave III leg that may reach the 95 region over the coming weeks, before a corrective red wave IV and higher wave V can get underway to complete a larger, blue wave 1).

TheLFB Trade Plan of the Day is one of the six that are available to members on the major pairs each day, plus four Jpy based cross pairs, as well as S&P futures, oil, gold, and the dollar index.

Written by TheLFB Trade Team, © 2007-2008 LFB Services, LLC. All rights reserved. http://www.TheLFB-Forex.com

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