US dollar drops as Fed cuts rates to zero in emergency meeting

• DXY on the backfoot as markets step away from the dollar post Fed cut.
• News also sent futures on the S&P 500 Index to fall about 5%.
• Bears can targe a 50% retracement on the March rally. 

The US dollar is lower across the board following a move by the Federal Reserve to not only lower the cost of the dollar on swap lines, but by slashing rates to zero in lieu of the scheduled meeting this week. The dollar lost ground in the DXY on Friday, -0.89 and is set to fall lower considering the moves in early Asia on Monday.  

The Fed cut its key interest rate by a full percentage point to near zero and said it will boost its bond holdings by $700 billion. These are massive easing in policy in an emergency move, sending EUR/USD to test fall just 1 pip shy of the 1.12 handle, GBP/USD onto the 1.24 handle, USD/JPY down by nearly 2% and AUD/USD to test the 0.63 handle. 

The news also sent futures on the S&P 500 Index to fall about 5%, hitting limits on trading, after stocks climbed more than 9% on Wall Street Friday, recouping most of their 10% plunge the previous day.

Bears on track for a 50% retracement

The start of the week's developments bring a more aggressive Fed response to the table and exposes the DXY to further losses. We are still in a massive unwind stage which could continue to support the euro which makes up the largest part of the DXY. A downside target below 23.6% Fibo retracement target at 97.80 comes as 96.60 for a 50% Fibonacci retracement target. 

DXY levels