As of January 17, speculators held the most contracts in the US dollar long in 4 years. With one FOMC meeting, that trade went wrong. We are talking gigantic sums of money traded by some of the most brilliant people in the business. The long US dollar trade should continue un-winding today taking US dollar lower.

Forget about Greece default concerns. The US Federal Reserve has set the tone that will reverberate louder.

The US Federal Reserve, as I have mentioned before, is the US dollar's worst enemy. Chairman Bernanke associates a rising stock market with rising confidence. As a student of the Great Depression, his paradigm is to avoid deflation at all costs. His goal is to avoid a second Great Depression and avoid the deflation Japan has seen for a couple of decades. As long as the US dollar holds rates between 0 and .25 until mid 2014 there is no reason to assume US dollar appreciation in the near term unless a major war breaks out, Euro is abandoned, and / or other currencies aggressively devalue their own currencies. Even then...who other than Japan will lower rates to the level of the USA?

So the "fix" is in. The market overnight reaction is selling the US dollar, buying everything else, and lifting most financial instruments. Let me repeat this....the trade is sell US dollars and buy other currencies and or use the funds for buying other financial instruments...anything and everything. The US Federal Reserve has also ignited once again the fear of future inflation. This means "fear of inflation" will trump abundant supply concerns in the short term for commodities. The US Federal Reserve is a game-changer. Gold and silver should move higher of course.

The Federal Reserve adopted a policy of 2% inflation as the official operating standard. Later in a press conference Chairman Bernanke said the FED would accept higher rates of inflation temporarily if this means improvement in US jobs. And so the great reflation continues...the US Federal Reserve knows their policy is inflationary. They are the guardians and have no other game plan.

The only change here is aggressive rate cutting by the ECB matching US levels. This is unlikely although rate cuts are certainly expected any day. If Euro breaks to the top trend channel line, we are bullish looking for 1.4000 minimum. All of this due to the FOMC meeting.

The market is expected to continue rising with ES moving toward 1350 and once cleared 1432 area. Any currency trader that thought the US economy was slowly improving as compared to other economies in the world...and thinking that US dollar would continue strengthening against other currencies is in a losing position.

In today's market action we are looking for a solid up day coupled with heavy volume confirming money on the sidelines is in full-throttle for a larger move higher. A higher volume day will lead more money into the market. This is what the Federal Reserve Chairman desires. If the public and institutions do not follow the FED's lead...well then...we have another failed attempt to reflate.

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