Market setting up for the Fed

Dollar futures have been on a steady decline as has the Euro the last few sessions. I think this is in response to an expected pause in Fed policy after next weeks meeting. As readers know I have been calling for a pause, but now few that we will get a 25bp cut on Wednesday followed by a statement highlighting inflation and basically letting the market know that there are no more interest rate cut's in the near term future. I think this is very smart as inflation is a big problem. Forget what is being reported, look at the essential things that you use everyday.

Gas, yesterday I filled up my 2004 Ford Sport Trec, cost $80.
Breakfast, $3.50 for an egg white sandwich (trying to watch my cholesterol) and $1.50 for coffee (street cart not a designer brand)
Lunch, $9.25 for a salad and a bag of chips (there goes the cholesterol).

The cost of day to day essentials is going up in a big way. This is money right out of your pocket and although the Fed will not admit it, they see the effect's and will try to address it. Crude is the key. They need to find a way to get the price down. Holding rates steady will not do it, but a dampening of demand will. From the States and overseas (specifically India and China). I think after the Olympics China's demand will lesson (no more window dressing) and India is having some issues with food prices and shortages. I am looking for a global slowdown in the weeks ahead, with rates moving higher (I know this makes no sense) to combat inflation pressures.

Good Luck and Good Forex Trading.