USD - Yesterday the greenback continued on its bearish path against most of the majors and
it slipped to another new...

... record low versus the EUR. The fears that the subprime
crisis will spill over into the broader economy and actually begin to slowdown
growth rekindled expectations that the Fed will further slash its 4.75 % key
benchmark rate. An additional rate cut by the Fed could have a significant negative
impact on the greenback as it will reduce the dollars appeal against the high
yielding currencies and therefore it will lower the level of foreign investment
coming into the US. In the last few weeks the greenback weakened the most against
the EUR and this is mainly due to the widening growth differential and the shrinking
interest rate differential between the US and the European economy. The current
market expectation is that will we see another rate cut by the Fed in the near
future and this is putting the dollar under major pressure. However a weak dollar
combined with rising oil prices will push up inflation and this could restrict the
Fed's decision with regards to future monetary policy.

There were significant news releases from the US yesterday and Fed Chairman Bernanke
remained discrete during his speech before the Chamber of Commerce Summit. Looking
ahead to today the most significant news to be released from the US will be Existing
Home Sales and Consumer Confidence. Both these figures are expected to release
weaker than last month and with the sustained problems in the housing sector it is
very likely that these figures may spring a downward surprise. If this is the case
then we could see some volatility that will push the dollar downward. The main
reason for this is because the weak data will raise the markets expectation of
another rate cut by the Fed which will put pressure on the greenback.



* EUR
Yesterday the EUR traded relatively uneventfully all across the board but it
continued to sky rocket against the USD reaching a new all time high for a third
consecutive day. The EUR touched the record mark of $1.4030 on the back of increased
market expectation that the Fed will once again cut rates in the near future. Even
the recent string of weak European data, including yesterdays Industrial New Orders
which released below expectations at -4.0 %, have been unable to put the brakes on
the EUR's bullish rampage versus the greenback. However the weak data is further
indication that the strong EUR is beginning to negatively impact the European
economy and if we see more bad news from the Eurozone over the next few weeks it
could cause the EUR to reverse. So traders will be paying close attention to today's
German Ifo figures to spot any further cracks developing in the European economy. If
these figures release weaker than expected then the EUR should lose some slight
ground all across the board and it could signify the peak of the EUR's rally against
the greenback.


* JPY
Yesterday the JPY gained ground against the USD and the EUR, reaching the 114.99 and
162.21 levels respectively. The JPY strength was mainly being driven by the problems
in the UK banking sector which have resulted from the spreading global credit
crisis. These problems created a feeling of risk aversion among investors causing
carry trades to unwind. In carry trades, investors transfer funds from a country
with low borrowing costs and invest in one with greater yields and hence they earn
the difference between the borrowing and lending rate. The risk involved in
undertaking this investment strategy is that the currency moves erase those profits.
Therefore if there is a feeling of risk aversion among investors then carry trades
will unwind and the JPY will strengthen as was seen yesterday. Looking ahead to
today the direction of the JPY may depend on the performance equity markets and
their impact on carry trades, also key US and European data release may cause some
slight movement in the Japanese currency.

Technical News
* EUR/USD
Today, the 4 Hour chart implies on a possible recovery of the USD when both RSI (78)
and Slow Stochastic (crossed at 82) are clearly in overbought territory. The 4 Doji
bars imply on an upcoming move and it appears that going long might be preferable.

* GBP/USD
The 4 hour chart notes that a tight bearish channel is forming and traders should
seek the breakout to get into the market at a good entry point for a long position.
However the daily chart indicates a breakout of the bullish channel, supporting the
fact that the GBP depreciation would be maintained in the short term.

* USD/JPY
The pair is in a bearish formation and the daily studies are strengthening the
notion that the pair's direction is down. The hourly confirm the bearish notion as
the 4 Hour RSI has failed to cut the 80 level from the bottom section. It appears
that the USD/JPY is heading towards 114.00.

* USD/CHF
The pair is heading down and is now at 1.1738. The next key level is 1.1700 which
would the lowest it has been since May 2005. If a breach through that level will
occur we might see a much bigger move. If the pair will be shy of a breach it may
constitute a great entry point for a long position.


The Wild Card
* GOLD
Gold broke the 724.50 support level. Gold is in a downtrend supported by 1H
exponential moving averages. The volatility is low. Bollinger bands have tightened.
Today, we expect to see a bearish configuration. 1H, 4H Elliott pattern imply that
the Gold should to gather momentum today. The target is 722.00. This provides
Forex traders with a great opportunity to go short on a very healthy downtrend.




Indicators
Date Time Country Event Period Previous Forecast Importance
25/09/2007 08:00 EUR German Ifo Business Climate Index 105.8 105.0 **
25/09/2007 08:00 EUR German Ifo Business Expectations Index 100.4 99.5 **
25/09/2007 13:00 USD National Home Price Index 199.2 **
25/09/2007 14:00 USD Existing Home Sales 5.75M 5.50M ***
25/09/2007 14:00 USD Consumer Confidence 105.0 104.5 **
25/09/2007 20:05 CAD BOC Governor Dodge Speaks **
25/09/2007 22:45 NZD Trade Balance -0.79B -0.99B ***




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