Economic News – USD – After brief hope that was generated due to a small correction, the Greenback continues the… … path we are so used to see it in.

The last two days were quite negative for the greenback with regards to the plummeting US housing market, and the
ongoing Sub-prime rate issue. Existing Home Sales was released lower than expected
at 5.75M demonstrating that the crisis has not yet been resolved. To add some steam
into the boiling situation, the New Home Sales was also released at a much lower
than expected figure of 834K. The Durable Goods release closed the negative news
releases with 1.4 %, and with a core figure that was much lower than expected and
dived from 0.5 % on a previous release into negative territory at -0.5%. The most
important news release expected from the US market would be the GDP Annualized that
is expected to rise from 0.7 % to 3.2 % in contrast to the GDP Deflator that is
expected to go down a bit from 4.2 % to 3.4 %. The general sentiment around the USD
is quite negative, as traders find it hard to support the greenback with no
significant signals that the housing market situation would get slightly better. If
the GDP figure will come out strong it might shed some positive energy on the USD,
but it would probably be implemented as a local correction before resuming on its
normal course. The nose dive of the Dow Jones of more than 300 points contributes to
the already sizzling negative sentiment around the USD. Hopefully next week will
generate a clearer picture as many key releases are expected to come from the US
market, especially the most important Change in Nonfarm Payrolls.

* EUR
The Euro-Zone is consistently proving its strength with a solid monetary policy and
a very strong currency. Although USD bearishness was seen all a cross the board, the
EUR seemed to be reacting with a certain indifference to the choppy price action.
The most important information that came from Europe yesterday was the German IFO
which came more or less inline with expectations and caused no significant effect.
The M3 Money Supply which measures the value of all currency and liquid cash assets
held by the public was released at 10.9%, which indicates the high levels of
inflation might be a problem to European economy, yet a reaction from the ECB
officials will not be seen soon due to many upcoming holidays. As for today the
Swiss Leading Index is expected be released, it demonstrates the future prospects of
the Swiss economy, which is growing slowly and steadily. Most of the focus today
will be concentrated on the US market with the GDP figure on tap.

* JPY
The JPY continued to gain ground yesterday particularly verses the greenback as
carry trades continued to unwind with a fresh bout of risk aversion emerging from
worldwide concerns with hedge fund losses. Carry trades have been the primary factor
responsible for the JPY weakening in the last few months, so now an unwind is the
main driver of the recent JPY rally. Earlier today in the Asian trading session
there was an important string of economic data releases from the Japanese markets.
The Japanese Core CPI, the Tokyo CPI and the Core Tokyo CPI all released inline with
expectations at -0.1 %. The Core figures, which exclude volatile food and energy
items, are unchanged from last month indicating to the market that although we are
not seeing inflation occurring in the Japanese economy just yet at least there is no
deflation and therefore the market interpreted these figures positively. Also this
news was followed by the Japanese Retail Sales figure that released in negative
territory at -0.4 %, which was well below the forecasted figure of 0.5 %. However
the negative Retail Sales figure could not hold down the JPY rally as the carry
trade unwind is dominating the direction of the JPY. With carry trades no longer the
name of the game we should see the JPY finish the week on a strong note.

Technical News
* EUR/USD
After the significant move down from 1.3850, the pair seems to be ignoring the
ongoing USD weakness and is trading on a 60 pip range. The daily chart is very
bullish and the hourlies are quite neutral. If the 1.3700 barrier will be breached
than we might see the bearish correction continue, but as it appears to be, 1.3815
is the next target price.

* GBP/USD
The pair peaked at 2.0560 yesterday and than dropped to the 2.0420 levels. If the
2.0400 level will be breached violently, we might see a very long bearish move for
the pair that has been going up nonstop since June. Looking for a good entry point
to go short on a long run position, might be the preferable strategy at this point.

* USD/JPY
The liquidation of the carry trades has taken the pair to a very strong drop, and it
touched 118.00. It is now correcting back to the 119.20 levels, but the daily charts
show that the continuation of the move is imminent. A break through the 118.00 will
confirm the bearish move as a strong one and will probably take the pair to the
116.50 zone quite quickly.

* USD/CHF
The pair seems to have a difficulty to break the 1.1960 level which is now
establishing as a very strong support. The entire move up to 1.2150 has been
corrected back, and the pair now consolidates on 1.2040. The daily and the hourly
charts are giving mixed signals and it is preferable to keep out of the market,
until a clearer picture is presented, or a key level is broken. Meanwhile range
trading with tight stops would probably be a smart move

The Wild Card
* Crude Oil
After a sharp drop from the 77.00 level, the oil is regaining its momentum, and is
now pushing up again. The slow stochastic is signaling that there is still room to
run up. The relatively low level the oil is in right now provides
Forex traders with a great opportunity to enter a very solid move up, with a target
of 77.20 maybe before the end of today's trading session.

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