Last week was characterized with a relatively empty US calendar aside from the interest rate statement that was left unchanged....

...


But the biggest event of last week
was no doubt the declaration of BNP Paribas bank, that all withdrawals are now
frozen, and there shall be almost no liquidity in the European market. This
indicates that the Sub-Prime crisis in the US is starting to be a much more global
problem, as it is now bursting in full scale in Europe as well. The BNP statement
caused the EUR/USD to fall down more than 150 pips, it appears that the fall was
originated from EUR weakness far more than USD strength, yet it marked a bullish
trading day for the USD all across the board.

As for this week, the US calendar will be quite full with major events, starting
today with the US Retail Sales which is very important as it makes up a large
portion of consumer spending, is a major driver of the economy, and has a sizable
impact on GDP. Traders pay close attention to Retail Sales because it is usually the
first significant indicator of the month that relates to consumer behavior and
usually delivers interesting trading sessions. Today's release is expected to come
out at 0.3% after hitting negative territory of -0.9% last month. The Core Retail
Sales figure is also expected to come higher than last month -0.4%, and be released
at 0.3%. If the figures will indeed come out this positive, we might see the
greenback showing strong performance over the course of this week, especially with
the heavy US calendar that is packed with events such as the US PPI, CPI, Trade
Balance, and the Empire State Business Conditions Index.


* EUR
The foreign exchange market reacted calmly on Friday as the Federal Reserve,
European Central Bank, and Bank of Japan injected more than USD300 billion of cash
into the financial system in order to allow financial markets to continue and
function properly.

The three central banks of the leading economies acted instantly and injected the
funds in order to ensure that market participants can continue to trade and prices
will remain stable. In addition worldwide banks began to be acquainted with the
deteriorating sub prime mortgage policies that now threaten the world's leading
economies.

The EUR also suffered from the drop in global financial markets as we mentioned
above however the stability was seen only after the ECB added 61.05 billion Euros in
liquidity to financial markets.

Generally, traders are holding their breath regarding the latest developments in the
world's economies, as the sub prime crisis is hovering above and threatening the
market with a colossal collapsing.
Traders need to be cautious with their bonds and yield investments and should be
considering the Forex market as a defense mechanism for their investment.


* JPY
The JPY held steady against the majors, floating around the 118.00-level versus the
USD and 162.00 against the EUR.
Earlier in the session, data released showed softer than expected second quarter GDP
Deflator, at -0.3% y/y and 0.1% q/q compared to a -0.4% and 0.2% forecast. Capital
expenditures were in line with forecasts, up 1.2% in Q2, while private
sector-consumption increased by 0.4% which may contribute to the recently
strengthening Japanese economy. The June current account surplus was softer than
consensus estimates, up by 48.4% to 1.5203 trillion yen, missing calls for a rise of
57.0% to 1.6090 trillion yen.
Japan's Minister of Economy Ota supported the strength of the economy, saying the
recovery remained intact, Ota added that he would carefully intend to monitor the
oil prices and the US economy, bolding the fact that he is concerned from the impact
of sub prime issues on the real economy. He also mentioned that the end of deflation
was in sight but still not over yet.
The Bank of Japan will deliberate policy on August 23rd, and is not expected to
change rates. We do not anticipate the BoJ to hike rates until early 2008; it seems
that the Japanese economy is back on track.


Technical News
* EUR/USD
The pair is floating in a wide range of 250 pips since the beginning of July, and
the trend looks to continue. The daily chart is showing moderate bearish sentiment,
and the hourlies support this. 1.3600 is now the key support level, and if breached
will probably deliver a clear sign that the EUR bearishness has begun, and the move
down is now validated.

* GBP/USD
After losing more than 400 pips in the last two weeks, the bearish sentiment
continues. The daily charts are showing that there is still more room to run and the
hourlies are showing a light oversold status. A preferable strategy might be to look
for a good short entry point.

* USD/JPY
The massive downtrend continues with full steam, as clearly demonstrated by the slow
stochastic and RSI on the daily chart. The momentum is still very high and shows no
signs of a stop. Next target price would be 117.20 and if it will be breached than
it will probably validate the moves' length to the 116.00 levels.

* USD/CHF
The daily chart indicates a clear downwards channel, and the pair is now floating at
the upper level. A break through the 1.2010 level will validate a channel breach and
will unleash a massive bullish move. If the pair will be shy of the break, a
moderate bearish movement is expected.




The Wild Card
* Crude Oil
After a 800 pip fall in the last 14 days, Oil shows its first signs of a reversal.
The slow stochastic shows a bullish cross, and the RSI indicates that the momentum
is strong. This provides Forex traders with a great opportunity to get in a reversal
move in a relatively early stage and generate high profit potential.
Forex traders with a great opportunity to enter a short position on a very stable
strong move. Next target price should be around 71.00.


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