FOREXYARD

USD
With New Home Sales on Tap Will EUR/USD Test 1.4550?
Intra-day gains in the dollar on a better-than-expected U.S. Existing Home Sales report tended to be short lived even though stabilization in the U.S. housing market is seen as critical to ending some of the concerns on the U.S. economy. The dollar finished yesterday's trading session with mixed results versus the major currencies while staying relatively unchanged against the EUR ultimately closing at 1.4709.

Still, lingering concerns on problems at U.S. mortgage finance companies Fannie Mae and Freddie Mac are keeping housing data at the forefront of investors' focus for this week. Data on New Nome Sales for July and 2 surveys of Nationwide House Prices are expected to be released today.

Meanwhile, Federal Reserve Chairman Ben Bernanke spoke on financial stability at the Kansas City Fed's annual Jackson Hole conference. His commentary didn't necessarily reveal anything new, though he did say that the recent decline in commodity prices, as well as the increased stability of the dollar, has been encouraging. If not reversed, these developments, together with a pace of growth should lead US inflation to moderate later this year. Analysts estimate that longer term prospects for a stronger USD remain intact given that the United States is likely to overcome the problem of slower growth sooner than other nations. The general sentiment towards possibly lower Interest Rates and towards the U.S. economy managing to get out of the global crisis earlier than the other economic areas will probably support the dollar over the next couple of months.

In today's housing data investors will look for clues on whether the battered property market is indeed stabilizing - which would be a relief for both the economy as well as for hard-hit US financial firms holding mortgage assets.

Later today, the FOMC Meeting Minutes from the Federal Reserve's August meeting may also be the event to watch. This record of the FOMC's latest meeting is expected to provide insights into the economic conditions that influenced member's vote on Interest Rates as well as offering clues on the possible outcome of future votes.

EUR
EUR Drops On Speculation of Euro-Zone Turmoil.
The EUR dropped towards a 6 month low against the USD yesterday before the German Ifo survey of business sentiment, with investors seeking clues on whether the Euro zone economy is hurting enough for a cut in Interest Rates. In thin yesterday's trade on the back of a UK public holiday, the EUR was down 0.3% at $1.4709 and down 0.7% at 161.68 vs. the JPY.

Signs of a broadening global economic slowdown have given the USD a boost in the past month as investors have dumped the currencies of economies losing steam, such as the EUR and the GBP. In fact, British Pound hit 2 year lows against the dollar on Monday. Last week's data showed the UK economy ground to a halt in the second quarter of the year, its worst quarterly performance since 1992, highlighting the risk of a British recession and raising the chance of a UK Interest rate cut later this year. Overall, the pound is down 6.6% against the dollar in 2008, the largest drop of any major currency other than the New Zealand dollar. With stalled UK growth which is seen as another example of growing economic malaise outside the United States, the GBP weakness helped the dollar against some currencies including the EUR.

Looking ahead for today, there are few major indicators on hand, though some releases can spark short-term volatility including both German IFO Climate and German IFO Expectations indices.

JPY
Japanese Economy Once Again Faces the Threat of Deflation.
Yesterday, the JPY was up broadly on the unwind in carry trades, although traders noted that the Japanese currency does not respond as sharply to the moves in stocks as it did earlier in the year when any sharp equity slide would send the Yen flying higher. By the end of yesterday's trading session, the JPY added 0.6% and closed at 109.41 vs. the USD. The big question now is whether it's the beginning of the carry trade unwind wave and a trend reversal for the Japanese currency or just another local correction.

Until yesterday, the JPY appreciated against the USD as U.S. financial shares dragged equity markets lower on persistent credit concerns, which prompted investors to reduce risk. The decline in the attractiveness of U.S. assets reduced demand for the dollars to buy them while simultaneously pushing investors into investments perceived as less risky, such as the Yen.

As usual, the move in the Japanese yen has little to do with Japanese fundamentals, and instead depends much more on broad risk appetite. This should continue to be the case during the rest of this week even though there will be heavy risk events on hands. Today there is no news events expected from the Japanese market, however on Thursday the Japanese CPI, the Unemployment Rate and Retail Sales numbers will all hit the wires. The CPI numbers may not influence price action too much, but the indicator should be watched as the headline index is anticipated to hit decade highs due to energy and food costs, while the core measure may barely reflect positive price growth.

Indeed, once commodity prices start to fall back again, the Japanese economy will once again face the threat of deflation. Concerns about credit risks both in the United States and Japan are still strong and given the risk of recession in the country, traders will be looking for indications that the BoJ is considering reducing Interest Rates.

Crude Oil
Baku-Tbilisi Pipeline May Resume Full Operations Within Days.
Crude Oil was little changed after rising yesterday to a $115.40 level as tropical storm Gustav formed in the Caribbean Sea, raising concerns it may threaten oil fields in the Gulf of Mexico. Fields in the Gulf of Mexico account for about 20% of U.S. oil output. Prices also rose after Russian lawmakers voted to recognize the independence of two breakaway Georgian regions, increasing the prospect of new tensions in the area. On the other hand, the Baku-Tbilisi-Ceyhan pipeline, which moves oil from Azerbaijan through Georgia to Turkey's Mediterranean coast, may resume full operations within days after a fire halted exports. This may definitely assist in bringing Oil prices further down. U.S. Light Crude edged up 29 cents yesterday to $115.40 a barrel though it still remains more than $30 below an all-time high reached only a month ago.
Technical News

EUR/USD
The pair is in the middle of a bearish trend as the attempts to breach through the 1.4620 support level continue. The daily chart's Slow Stochastic indicates that the bearish momentum is still strong and a breach is very likely. Going short appears to be preferable.

GBP/USD
The cable is testing the key Fibonacci level of 1.8400 and is the middle of a very strong bearish trend. A breach through that level will validate a much stronger bearish trend that might take the pair to the 1.8350 zone. Going short might be the right path today.

USD/JPY
The bullish channel continues at full steam, as the 4 hour chart is showing that there is still much steam in the trend. The daily chart is showing a double doji formation with a bearish cross on the slow stochastic which might indicate a moderate corrective move before the bullish trend resumes. Buying on dips might be a great strategy for that pair.

USD/CHF
The bullish trend continues at full steam as the pair shows no immediate signs of a halt. The 4 hour Slow Stochastic is showing a positive slope and the RSI is floating at 50 which points at additional bullish momentum. There seems to be no upcoming correction on the local level, and going long looks like the right decision today.

FOREXYARD

Unemployment Claims May Define USD Direction.
Yesterday the EUR/USD pair experienced a highly volatility and finished trading session with mixed results versus its major rivals. The EUR/USD bounced up and down during most of the day, finally closing at 1.4773 level, unchanged from the day prior. Overall, it lost 0.2% vs. the EUR yesterday when it declined to $1.4773 from $1.4747. The greenback may fall to $1.50 per EUR in a few days should it weaken below $1.48.

Expectations for the near future look to hold unclear characteristics as the upcoming US calendar doesn't look to have much that can help revive USD bulls once again. Yesterday's slightly bearish dollar trend was especially concerning due to the lack of market moving economic events both from the US and the Euro-zone. As it seems now the greenback light depreciation comes mainly on the heels of traders fearing the US economy woes are not over. From the fundamental point of view, the only economic release that deepened USDs' falling trend yesterday was the Crude Oil Inventories. The indicator printed a much higher than expected result of 9.4M. Due to the unexpected figure, Oil prices rose sharply, which helped to further tumble the US currency.

The dollar also weakened on speculation credit- market losses in the U.S. will deepen. Fannie Mae and Freddie Mac shares tumbled in New York trading to the lowest levels since at least 1990 as speculation increased that the U.S. Treasury will have to bail out the mortgage-finance companies.

The U.S. economic outlook darkened in July for a 3rd consecutive month as Philadelphia Fed Manufacturing report today may show another contraction. The Philadelphia Fed's general economic gauge due at 14:00 (GMT) is projected to come in at -12.6. If the final figure will indeed print such a low result today, we may see the dollar continuing its falling trends vs. the rivals. The leading index is also due today at 14:00 (GMT) from the New York-based research group. The Conference Board's index of Leading Indicators, a measure of the economy's direction over the next three to six months, is expected to decline by 0.2%, according to the median forecast. The previous measure fell 0.1% in June Overall, given today's pessimistic fundamental forecasts, the USD may find itself falling deeper into a bear's cave during the day.

Will The Heavy Fundemantal Day Pull The EUR Up?
The EUR finished yesterday's trading session with mixed results versus the major currencies. The 15 nation's currency saw high volatility especially against the USD finally closing at 1.4773 level, unchanged from the day prior. EUR also appreciated yesterday versus the GBP finally closing at 0.7916 price level. The EUR gained yesterday vs. the USD on concerns that futures traders will pare bets on USD gains, which has gained against most of its currency rivals during this month.

Overall, the EUR has lost 7.7% versus the USD since touching an all-time high of 1.6038 on July 15. The European currency depreciated as reports showed the Euro zone economies shrank in the 2nd quarter and Crude Oil fell more than 20% from the record $147.27 a barrel reached July 11.

However, gains in the EUR may be limited as Germany's Economy Ministry yesterday said the economic outlook has worsened even beyond the 2nd quarter, when Gross Domestic Product shrank for the first time in 4 years, as reports reveal. Investors are also uncertain about whether the EUR uptrend can be sustained in the context of a slowing U.S. economy. Look ahead to today, we have a batch of an important EUR data. Economic events coming from the Euro-Zone are the Flash Manufacturing PMI and Flash Services PMI. These indices are seen as leading indicators of economic health in general. Businesses usually react quickly to market conditions, and their purchasing managers hold perhaps the most current and relevant insight into the company's view of the economy. A lot of attention will be focused on the outcomes of today's reports as they might hint on crucial decisions regarding the inflation revision in the Euro zone and the future of the local currency.

The JPY Looks To Extend Its Profits?
The JPY underwent a bullish trading session yesterday, as it appreciated against most of its major currency rivals. The JPY saw a 60 pips rise against the USD as the pair went below the 109.60 level. The JPY also saw rising trends against the EUR and the GBP.

Yesterday, the Japanese government bond futures retreated after pulling back from four-month highs as prospects for an interest rate cut from the Bank of Japan were dismissed. Governor Masaaki Shirakawa reiterated the central bank view that the economy would eventually return to moderate growth. That cooled expectations that the BOJ will be forced to cut interest rates by early next year, and acted as a significant support for the JPY.

As for today, the sole event that is scheduled from the Japanese economy is the Monetary Policy Meeting Minutes. This indicator will likely to have little effect on the market as it released at 23:50 GMT. Forex traders invested in JPY related crosses should stay tuned to stock market movement today as this information should determine JPY's direction for today.

U.S - Russia Tension to Raise Oil Prices
Crude Oil prices continue to rise as Oil made its 3rd consecutive day of bullish behavior. A barrel of Crude is currently traded around $116.50, $3 above yesterday's midday rate.

The U.S Crude Oil Inventories indicator has initially driven Oil prices down to $113 a barrel, as the publication of this indicator showed that prior expectations for a 0.7M increment were sorely moderate as the indicator demonstrated a 9.4M additional barrels as opposed to last week. However, shortly after Oil prices have resumed their uptrend.

In addition, the U.S-Poland agreement that allows the U.S to construct a missile-defense system in Poland has generated a great deal of tension between U.S and Russia. Therefore Oil prices are expected to rise even more.
Technical News

EUR/USD
It seems that the pair is extending its bullish correction, as it entered an uptrend ever since it tested the 1.4630 level. Currently, all oscillators on the 4 hour chart are pointing up, suggesting further bullish behavior for the pair. Going long might be preferable today.

GBP/USD
The pair has been range-trading for a while now, as the cable appears to consolidate around the 1.8600 level. The Bollinger Bands on the 4 hour chart are tightening, indicating that a significant breach is forthcoming. Traders should wait for that breach and swing.

USD/JPY
After a long period in which the pair has mainly fluctuated, it seems that we are on the verge of a relatively strong move. The pair has crossed the lower border of the 4 hour chart's Bollinger Bands, indicating that it should enter a downtrend. A breach through the 108.60 might validate the bearish move with a price target of 107.80.

USD/CHF
The pair has consolidated around the 1.0950 level, without making any major breach for a while now. As all oscillators on the 4 hour chart are giving bearish signals, it appears that going short with tight stops might be the right strategy today.

E-Forex

EURUSD
EURUSD Support into the 1.4650 zone failed to hold and the Euro is currently testing bids into the 1.4630 region. Intraday studies are bearish and a sustained break of 1.4650 may accelerate the decline towards next bearish objectives into the 1.4600 zone and lower, at 1.4530/40. Resistance emerges at 1.4700 and 1.4770. Higher than that, resistance is also seen at 1.4815. Current quote is 1.4633 @06:30 GMT

Support levels: 1.4600, 1.4530/40 and 1.4500.
Resistance levels: 1.4700, 1.4750, 1.4815 and 1.4910.
Market sentiment: long-term : bullish, mid-term : bearish, short-term : bearish

AUDUSD
Yesterday's minor correction to .8750 is over and the Aussie resumed to downtrend, now testing bids at .8630. Support backs .8630 at .8605 and .8550. The daily studies are highly oversold and the hourly charts are bearish as well. More downside action is possible if the support at .8605 won't hold. Current quote is .8636 @06:30 GMT

Support levels: .8630, .8605, .8550 and .8510.
Resistance levels: .8710, .8740/50, .8795, .8840/50 and .8950.
Market sentiment: long-term : bullish, mid-term : bearish , short-term : bearish

EURCHF
Key resistance into the 1.6170 region could not be broken on yesterday's test but the overnight decline to 1.6112 is pretty much corrective in nature, therefore a new test of 1.6170 is likely. Minor fib resistance is formed at 1.6145. Support is seen at 1.6105/12. Intraday studies are bullish at the time of this writing. Current quote is 1.6140 @06:30 GMT

Support levels: 1.6105/12, 1.6095, 1.6030 and 1.5960.
Resistance levels: 1.6145, 1.6170/75 and 1.6235.
Market sentiment: long-term : bullish, mid-term : neutral, short-term : bearish

Forexyard

Economic News
USD
The US Dollar experienced a bearish trading session last week, largely due to the rising oil prices and the hesitancy of the Federal Reserve to hike Interest Rates in order to battle inflationary scares in the US. Investors came into last week with the assumption that the US would beat the Euro-Zone to the punch and hike Interest Rates. This and some poor fundamental data from the Euro zone initially sent the USD up vs. most of its major counterparts. However, as the week passed by, the greenback was not able to maintain this trend and began to fall consistently versus most of its major currency rivals. Poor US data did little to help the greenback cope with what ended up being a non-changing Fed Rate announcement. Additionally, the FOMC was about as vague as possible regarding how inflationary struggles in the US would be addressed. Dollar prices proceeded to make substantial drops versus the EUR and JPY. As the dollar slide continued towards the week's end, Crude Oil prices hit an all time high, and the US stock markets took a big hit.

This week should prove to be even more important to the Dollar as we look forward to critical news, in what is already a shortened holiday week in America. On tap this week we can expect the ISM Manufacturing Index, ADP Nonfarm Employment Change, Factory Orders, Crude Oil Inventories, Average Hourly Earnings, Unemployment Claims, and the Unemployment Rate. These figures will be highlighted by the Thursday release of Non-Farm Payrolls and the ISM Manufacturing Composite. These events will likely provide much needed volatility in the market which has missing for quite some time now. We can expect to hear from several members of the Fed this week, as we have begun to see a clear division of monetary policy within the US economy. With the next scheduled rate statement for the Dollar roughly one month away, the Dollar will have to move in response to outside news.

Today, the US will be uncharacteristically absent from most of the news day. Chicago PMI is the only scheduled event on tap and should have minimal effect on overall market movement. As such investors are advised to review the USD counterparts before placing their transactions.

EUR
The EUR recovered nicely last week, mainly against its US counterpart. Poor data early in the week left a bad taste for Euro enthusiasts as all seemed to be going in favor of the USD. Once the FOMC statement from the US came back with no change, traders jumped into action again and used their EUR to purchase more of the USD and the JPY. Furthermore, the EUR has now put the ball back in its court in terms of renewing its dominance aboard the currency lists, especially after Crude Oil prices took their toll the hardest on the USD last week

The week ahead should be huge for the EUR as we can expect market affecting news from Monday to Friday. The week from the EZ will be highlighted by German Retail Sales, Manufacturing PMI, PPI, German Factory Orders and the all important Interest Rate Statement. The markets are scheduled to return with favorable results, but the real key is the Minimum Bid Rate hike. ECB President Jean-Claude Trichet has been hesitant in regards to a possible Interest Rate hike since announcing a shift in policy several months ago when he called for July to be the month where the rate will change. July is now upon us. Investors are happy to access the market under such anticipated favorable conditions.

Today we can expect the 9:00 GMT release of the CPI Flash Estimate and Italian Preliminary CPI. Both events should have little effect on the market's movement. Euro traders should continue to see gains spill over from last week. However these gains may be within a smaller range with the lead up to Thursday's mega news day.

JPY
The JPY experienced two different trading periods within last week's session. Up until Thursday mid-day the JPY was within its usual habit of range trading versus its rivals and bearish trend against the USD. Last week's Japanese economy produced a great deal of fundamental data. Yet, these data proved to have little effect on the movement of the Japanese currency. The big move came on Thursday, when the US Federal Reserve left Interest Rates unchanged and left traders in a state of ambiguity regarding the future of the USD. This sent US stock prices down. The movement of the stock markets sparked risk aversion in the market initiating the JPY's bullish trends against most of its rivals. By the end of the previous week, the USD/JPY traded at a 3 week low, dropping almost 200 points to close just above 107. Looking ahead this week three important indicators will be published. Today, the Tankan Large Manufacturers Index and the Tankan Large Non-Manufacturers Index will print their results. Both indices are forecasted to decrease. The 3rd vital indicator for the week will be the Average Cash Earnings, which should decline to 0.7%. Traders are advised to pay close intention to Japan's trading partners and stay keen as this week is expected to turn extremely volatile for the Japanese currency.

Crude Oil
The surging prices of Oil are taking a toll on US consumers on their country's economy. Mounting concerns about the condition of the US economy will probably bring Oil prices into sharp focus. Moreover, this Thursday, the European Central Bank is widely expected to raise Interest Rates. Higher Interest Rates in Europe are expected to lower the value of the USD and push it further south. Correspondingly, a weaker U.S. currency tends to boost the price of dollar-denominated commodities, such as Oil, as it makes them cheaper for holders of other currencies.

Last week stocks finished the week sharply lower, with Oil near $143 a barrel. Record-high Crude prices are the larger dangers to the economy than any other factors Rising Oil prices are also driving up inflation rates. In fact, US Core Consumer Price inflation rose at a 2.3% annual rate during the first quarter, up from a previously estimated 2.1% rise. Core inflation has risen 2% in the past year, just at the high end of the Fed's comfort zone.

Technical News
EUR/USD
There is a very distinct bullish channel forming on the hourly chart, as the pair is now floating around the bottom level of it. The Slow Stochastic on the 4 hour chart suggests the trend can continue rising. The breach through the 1.5815 level will validate the next 1.5855 target price.

GBP/USD
All indicators on the hourlies are showing that we may see the pair correcting back to the 1.9850 level. A bearish cross on the 4 hour chart seen by the Slow Stochastic also supports that notion indicating that a local correction might be imminent. Going short with tight stops might be the right thing to do today.

USD/JPY
The downwards channel on the daily chart still remains intact, as the pair now floats on the bottom barrier. The momentum is bearish and very strong. The hourlies also support the bearish notion, and it appears that the pair still has some more room to run. Going short is a preferred strategy today.

USD/CHF
The bearish momentum the pair has shown since the breach of the channel on the daily chart continues. The daily Slow Stochastic is showing the continuation of the trend, and the hourly studies confirm the bearish notion. Going short might be the right choice today.

CMC Markets NY

Bernanke's Speech Will Also be Key
In addition to this week's ISM surveys and Friday's labor report, Tuesday's speech by Fed Chairman Bernanke should be instrumental in adding further certainty to the market's probability of 2008 Fed policy. The importance of Bernanke's speech lies in the fact that his views on the economic outlook have not been revealed since his last Congressional testimony in April 2-3. Since then, most FOMC officials have stepped up their anti-inflation rhetoric, with the more hawkish ones (Kohn, Fisher and Kroszner) implicitly dismissing the case for further rate cuts. Nontheless, the Fed's latest central tendency forecasts issued downward revisions on growth and upward revisions on unemployment. How will Bernanke balance these forces with rising inflation risks wil be the key. We expect Bernanke to sound off a firmer tone on inflation and acknowledge the relative stability in financial markets, rather than discuss any improvement on the macroeconomic front. Said differently, the speech is will more likely to eliminate market expectations for a rate cut this summer, rather than add to existing expectations of a rate hike by year-end.

Today's release of the May manufacturing ISM and Wednesday's release of services ISM will also be key in further gauging the extent of the recession in manufacturing and the slowdown in services as well as the employment outlook in the sectors.

May non-farm payrolls are expected to show a loss of 50K jobs in May from a loss of 20K in May, with the unemployment rate edging up to 5.1% from 5.0%. We expect prolonged losses in payrolls into the rest of the year to dampen consumer spending and force the Fed into renewed easing in Q3 once equity markets are pressured by the economic fundamentals.

Euro Struggles Despite IMF Upward Revision
Euro treads lower despite Eurozone factory PMI edged up to 50.6 in May from earlier estimates of 50.5. The figure, however, is lower than April's 50.7. The IMF revised its 2008 Eurozone growth forecast to 1.75% from initial estimates of 1.4%, but expects growth slowing to 1.25% in 2009. The Fund said inflation is uncomfortably high and expects it to remain above 3% in the near future, well above the ECB's mandated ceiling of near 2.0%. It also deemed current ECB rates as “appropriate” and to remain steady for the rest of the year. Last week's latest evidence of further rise in Eurozone inflation means that ECB president Trichet will preserve his hawkish stance in Thursday's press conference. Tomorrow's speech by Bernanke should also help determine whether the euro could recover above the $1.56 figure.

Separately, remarks from the special economic adviser to the ruler of Qatar indicating the need for action on currency policy in order to tackle surging inflation are among the recent factors raising the probability of a revaluation of Gulf currencies. The recognition of rising inflation by the Fed and the US Treasury attests to the prolonging of general inflationary pressures, thereby most likely prompting GCC countries into action on the forex front. The political factors preventing a depegging from the dollar are considerable, thus leaving revaluation as the only option. Any signs of revaluation are likely to have a negative USD reaction to the benefit of the euro.

Resistance is expected to prevail above the $1.56 figure, while downside is seen testing 1.5480 and 1.5440. We expect the euro to remain largely on the defensive ahead of Friday's US payrolls.

Sterling Shows Why It Remains Undesired
Sterling continues to demonstrate why our bearishness in the currency remains unfazed despite gains of the past 2 weeks. The currency lost 2 cents in a few hours, reversing all the advances made in more than one week after UK mortgage approvals hit a record low of 58K in April (versus expectations of 65K and previous 63K) and total lending dropped to a 6-year low.

Separately, UK manufacturing PMI fell to 50.0 in May from 50.8, undershooting forecasts of 50.5. The figure was the lowest since July 2005. The theme of slowing business activity and rising inflation is further resounding inside the central bank. The output price index rose to 62.0 from 61.9, attaining an uninterrupted streak of 34-consecutive monthly increases.

The deteriorating data picture in the UK supports our forecast for interest rates to reach 4.25% by year-end from their currency 5.00% despite deteriorating inflation. We expect the combination of prolonged credit crunch and a weak UK consumer to shift the priority to economic growth away from the Bank of England's government imposed inflation target.

Cable support is seen holding at $1.9580, a breach of which is likely under a stronger than expected ISM reading (above 49). Upside seen capped at previous support of 1.9660.

Crown Forex

Major Market Mover: Sales And Inflation!
The busy week withholds major details within its folds and today the US will start to bring up the heat, especially as Fed's Ben Bernanke is to speak at a financial markets conference on liquidity and leads may be abstracted about the future of the US economy and rates expectatio

The start for today will be from the European continent as UK is to announce their most crucial piece of data that will come to confirm surging new record of prices imposed by producers to the economy. The CPI is expected to leap forward ahead extending the rally from the bank's target zone to an annual 2.6% as the BoE left rates steady preemptively as inflation according to King will prolong the spike above 3.0% this year.

Balancing among downside risks to growth and upside pipeline pressures is complicating the picture and forcing the easing policy for the BoE to gradual as they suffer the aftermath of the credit meltdown and the worst housing conditions since the last recession. Inflation is eating away consumers' disposable income and high food and energy prices are formulating a burden for them to maintain their high living standard, and that concerns the UK and the US in specific.

The feds when decided to take rates down to 2.0% in the seventh consecutive cut had left the door open, threatening of inflation threats that might withhold them from easing further. As now the focus is on growth and inflation data which might provide the insight about the timing and the extent of the next move, as futures traders are keen for steady rates in the upcoming meeting.

As the start today will be with April Retail Sales report, as consumers are burdened as we said by surging energy and food prices in addition to a fragile and week jobs markets as the layoffs have mounted strongly in the first quarter. Retail Sales are expected to have dropped 0.2% after the unexpected rise in March of 0.2 percent, while sales excluding autos are expected still strong and to have gained 0.2% after 0.1% in March.

Consumer spending accounts for the major contributor of the aggregate economy nearing 3/4 of the Gross Domestic Product, and as long as the sentiment remains weak they are suffering with home losses, homelessness, tight liquidity and joblessness they are still to fall behind of supporting the economy after the sluggish contribution they posted in the first three months of the year. While with now emerging inflation pressures mainly driven by imported inflation as the spare capacity in the economy is still high as economic activity remains week; confirming those fears to price stability is today's Import Price Index which is expected to have edged slightly from March rising 1.6% after 2.8% while on the year expected to edge from 14.8% to 15.0 percent.

Bernanke will be pleased to see that the gauge of inflation in the economy is still lidded as the Feds unlike the European counterparts take core inflation into consideration, and as long as the spike of volatile factors do not materialize then the policy now remains accommodative and is to promote growth. Rebates according to the fiscal stimulus have started to be given to consumers and it is still early for us to tell the effect though the Feds are sure they are to stimulate spending and so forth the economy.

The conference today is waited to see if the Chairman is to provide more details on the economy, as he will be addressing the liquidity issue, the last of which measures were taken was to increase the swap lines with the ECB and the SNB and enhance the auctions amount by 50% as dollar LIBOR was shooting the roof in Europe showing that still liquidity is a matter to take into consideration regardless of the massive amounts pumped to secure markets specifically by the ECB.

Stay tuned for this rich day, as we are to keep you upbeat with the major change in sentiment that is to abrupt after Bernanke takes the stand and the retail sales set the ground for more inflation and housing data this week…

Crown Forex

Major Market Mover: ADP, GDP, To The FOMC...
All the wait, all the wondering, all the speculations, all will materialize today, as the U.S. economy takes over markets, and start pumping its famous class A fun-damentals, starting form ADP report, to the GDP Growth, passing through PCE and PMI, and Closing with FOMC Decision.

The U.S. economy is the superstar today, collecting all sectors in the economy together and just giving investors the answers of all their questions in batch processing kind of way, leaving markets afterwards in the hands of investors ana-lyzing and interpreting every single number that was issued today...

The start will be with the ADP employment report, the first clue on the jobs mar-ket status in April, the reading that is getting closer month after month to the ac-tual nonfarm payrolls figure, yet still it is not that trust worthy and not a major market mover like the actual nonfarm payrolls count. The report is expected to reveal that the private sector in the economy added has shed 60,000 jobs in April after adding 8,000 in March, pointing for a worse labor market in the second quarter 2008.

The second report today might be the most important, as the department of commerce announces the advanced reading for the 1st quarter gross domestic product, where most analysts expects the economy to grow on the slowest pace in 5 years by 0.4%, following 0.6% growth in the 4th quarter, and confirming all expectations that the economy is actually in a recession, and without any doubts this situation can not be reversed by a magical word, it needs a lot of time for the growth to get back on track.

According to the last FOMC meeting and minutes, the economy might even con-tract a bit in the first half of the year, so maybe even those expectations are a bit optimistic, but whatever it was, all factors are giving us the answers we need for the question... is the U.S. economy in a recession??! We just need to see the growth of the 1st quarter...

Personal spending is expected to grew on a slower pace as well, why not when all we can hear nowadays is higher food and energy prices, more financial turmoil, more losses, deeper housing slump, fewer jobs, and really bad consumer confi-dence, it is no wonder that both consumer and business spending will drop. Spending is expected to grow 0.7% in the 1st quarter 2008 according to the ad-vanced reading, following a 2.3% growth in the 4th quarter 2007.

Later, Chicago purchasing managers index is expected to show a deeper contrac-tion in April, reaching to 48.0, giving another confirmation that businesses are not doing well in the economy, and it is not expected to do so anytime soon.

And eventually, and after a two days meeting, the federal open market commit-tee will announce their decision on the feds funds target rate, and what might a more beautiful closure for such a beautiful day than a rate decision, and the odds are spreaded between a quarter point cut-which is the highest possibility- and a steady rate decision, and the odds are 80% to 20%...

Yet the most important thing is the what the FOMC statement might say today about the economy and the hints it might give on the future of interest rate, be-cause the trick here is that a lot of analysts are thinking that a 2.00% benchmark rate is enough to stimulate economic growth, while other believes in a 1.75%, and I count myself as one of those, but what the feds might say about it is the most important thing, and what language changes we get from it might be the major market mover for today as it might change the odds for the next FOMC meeting's decision.

And by that, we close our day, our busy hectic way and then we go back to our families, thinking and analyzing every single number, and then start building a new more clear vision about the U.S. economy, not forgetting that we still have the jobs' report on Friday that might give us another contribution on the state of the economy...

Wachovia Corporation

U.S. Review
The Great Malaise
Next week will bring our first look at first quarter real GDP growth. Our latest read has the economy expanding at a 0.7 percent annual rate. While on the surface, such growth flies in the face of many of the recent business headlines, it is only modestly ahead of the consensus estimate of 0.4 percent. Two great unknowns in the GDP data are what happened to business inventories and net exports. We are assuming a modest $7 billion decline in inventories and look for a slight improvement in the nation's trade deficit to add roughly 0.4 percent to first quarter growth. Consumer spending is expected to eke out a slight gain, while business fixed investment is expected to decline. Home construction will likely post its biggest quarterly drop in more than 30 years. So, while we are expecting growth, the economic environment is challenging.

Looking forward, second quarter real GDP growth will be helped out a great deal by the economic stimulus checks, which will begin showing up in tax-payers bank accounts early next week. The rebates have been accelerated and all will be sent out during May.

Rebate Checks May Stave Off A Second Quarter Drop In GDP
Our current forecast has a 0.7 percent drop in real GDP growth during the second quarter. We had been expecting the rebate checks to be sent out over a two-month period, which would push the bulk of the impact of increased spending into the third quarter. The accelerated timetable for getting the stimulus checks to tax payers means that second quarter real GDP will likely come in stronger than we previously thought. Our first pass at the forecast has real GDP essentially unchanged for the period, which is the quarter that we see as greatest risk for seeing a decline.

Of course, if consumer spending is stronger than expected during the second quarter, then some of that increase will likely come out of current inventories. The credit crunch could add fuel to an inventory drawdown, as many retailers have seen their credit lines cut and will need to sell off inventories in order to raise cash. A bigger drawdown in inventories could possibly overwhelm any additional strength in consumer spending, leaving us with a decline in real GDP for the quarter.

While we acknowledge the downside risks to inventories and the economy, it is also important to recognize the upside risk. Over 90 percent of consumers and nearly three-quarters of economists believe the economy is currently in recession. If consumers spend their rebate checks promptly, it is entirely possible we will not have a decline in real GDP in 2008.

We have noted these issues before in our weekly and monthly outlook and even raised the question of whether we can have a recession without a decline in real GDP. We believe we can, particularly if we have a generalized malaise across the economy that results in four or five consecutive quarters of near zero real GDP growth. Such an environment would produce a steady rise in the unemployment rate up to 6 percent or so.

As far as this week's economic indicators go, we had a real mixed bag. First-time claims for unemployment insurance fell a much larger-than-expected 33,000 and continuing claims also posted a convincing drop. Orders for durable goods fell 0.3 percent in March but rose a healthy 1.5 percent after excluding the volatile transportation sector. Data from the housing sector remain weak, particularly sales of new homes. The latest figures show new home sales plunging 8.5 percent in March, following a 5.3 percent drop the previous month. We believe these figures may mark the bottom for new home sales, as credit market concerns likely added to the generalized housing woes in February and March. We expect a slight improvement in sales this spring.

Real GDP • Wednesday
While we only see one decline in real GDP over the coming quarters this year, the economy will feel weaker than that. The weakness in imports combined with the recent strength in exports is producing a sharp turnaround in the trade deficit, which is expected to provide the bulk of real GDP growth during 2008. Business fixed investment and commercial construction are both expected to weaken over the course of the year. In addition, state and local government outlays have been scaled back, reflecting the growing strain from slower growth in property tax receipts.

We expect first quarter real GDP to come in slightly positive, rising at a 0.7 percent pace. We do see real GDP slipping into negative territory during the second quarter, but only modestly, falling at a 0.7 percent rate. The pace of economic growth should pick up in the second half of the year as federal tax rebate checks add to personal consumption growth.
Previous: 0.6%, Consensus: 0.2%, Wachovia: 0.7%

ISM Manufacturing Index• Thursday
Despite a slight rise from February, the Institute for Supply Management's Manufacturing Index signaled factory sector activity contracted again in March, registering at 48.6.

Another weak reading is expected in April. Regional purchasing managers' indices have been mixed as evidenced with the Empire State index rising 23 points while the Philly Fed index registered its fifth consecutive monthly contraction reading. This mixed picture suggests little change in the national headline index. The ISM's new orders index, which is a leading indicator for activity in the factory sector, registered its fourth consecutive month below the key 50 expansion/contraction line. While export growth has blossomed for manufacturers who sell their products outside the U.S., we suspect weak consumer spending, slow motor vehicle sales activity and the continued housing market contraction will pressure the headline index lower in April.
Previous: 48.6, Consensus: 48.0, Wachovia: 47.4

Employment Report • Friday
Nonfarm employment contracted during the first quarter with payrolls declining 80K in March with downward revisions of -76K in both February and January. The unemployment rate jumped to 5.1 percent from February's 4.8 percent reading.

The labor market remains weak as we enter the second quarter. The four-week moving average of initial jobless claims, a leading labor market indicator, remains elevated and is consistent with another monthly contraction. Interestingly, we haven't seen a sharp increase in this series that typically occurs in the early stage of a recession. The April weakness is expected to be broad based with losses in construction, manufacturing, and goods producing sectors more than offsetting gains in leisure & hospitality, government, and education & health. The unemployment rate should remain steady at 5.1 percent.
Previous: -80K, Consensus: -75K, Wachovia: -44K

Euro Surges to All-Time High
The euro surged to yet another all-time high this week, briefly trading above $1.60 on Tuesday before falling back at the end of the week (see chart at left). So what's behind the recent strength of the euro, and will the currency continue to appreciate?

Shifting expectations about the outlook for ECB monetary policy is the proximate cause of the euro's recent appreciation. Earlier this year most investors expected the ECB to cut rates by 50 or 75 basis points by the end of the year. However, the realization that economic activity in the Euro-zone is not completely falling apart along with the sharp increase in the CPI inflation rate (see top chart on page 4) have caused a rethink about the extent of ECB easing this year. Indeed, a member of the ECB Governing Council, the body charged with setting monetary policy, raised the possibility this week that the ECB may actually raise rates rather than reduce them. His comments helped to propel the dollars/euro exchange rate above $1.60.

However, by the end of the week the euro had fallen to a three-week low against the greenback due to weaker-than-expected economic data in the Euro-zone. The "flash" estimate of the manufacturing PMI for April suggested that activity in the industrial sector weakened more than most investors had expected.

The big blow to the euro, however, came with the release of the Ifo index of German business sentiment on Thursday. As shown in the middle chart, the Ifo index, which is highly correlated with growth in German industrial production, fell to a 2-year low in April. Although the index remains at a level that is consistent with continued growth in industrial production, the larger-than-expected drop in the index suggests that growth has weakened. Not only is the German economy the largest in the Euro-zone, but Germany led the "Big 3" (Germany, France, and Italy) in GDP growth last year. If growth in Germany is weakening, it seems reasonable that the outlook for the broader Euro-zone economy is darkening. The news took the wind out of the sails of those market participants looking for a near-term rate hike by the ECB. 4

The euro's decline against the greenback also reflects a bit of generalized dollar strength this week. As shown in the bottom chart, the dollar rallied versus the Japanese yen and most other major currencies as well. As discussed in the "Interest Rate Watch" on page 6, there has also been a bit of rethink regarding the outlook for Fed policy going forward. The recent rise in yields on U.S. Treasury securities, which improves the relative attractiveness of those securities to foreign investors, has generally given the greenback a boost.

The euro suffered one of its worst weeks vis-à-vis the dollar this year. Does this mean that the euro-dollar exchange rate will begin to trend lower? We think it would be premature at this point to look for sustained dollar appreciation against the euro. The U.S. economy is not out of the woods, and further Fed easing remains possible as long as U.S. growth remains sluggish. However, we believe that the greenback will begin to trend higher in the second half of the year as it becomes clear that the Fed's easing cycle has indeed come to an end.

Japanese Industrial Production • Wednesday
The usual end-of-the-month barrage of Japanese economic data will give investors an up-to-date look at the current state of the economy. Recent data suggest that the Japanese economy is slowing, so investors will be especially interested to see how industrial production fared in March. Data on retail spending, housing starts and the labor market are also scheduled for release next week. Data released this week showed that CPI inflation shot up to 1.2 percent in March, its highest rate in ten years.

The Bank of Japan also holds a policy meeting on Wednesday. With inflation rising, will the BoJ hike rates at the meeting? No. The core rate of inflation is much lower (0.1 percent), and slowing economic growth argues against a rate hike in the foreseeable future.
Previous: 1.6% (month-over-month), Consensus: -0.8%

Euro-zone CPI Inflation • Wednesday
CPI inflation in the Euro-zone has shot up significantly this year. Although most of the increase is due to the spike in energy and food prices, the core rate of inflation has edged up recently as well. Consequently, the inflation-phobic ECB has been very reluctant to cut rates. Indeed, a rethinking of ECB policy this year has contributed to the recent strength of the euro (see the main body of the text). A sustained decline in the inflation rate likely would lead to euro depreciation, because it would open up the door for eventual ECB easing.

The docket in Germany, the largest economy in the Euro-zone, is full with data releases as well. Data on retail sales and the labor market will give investors some insights into the current state of German economic activity.
Previous: 3.5% (year-over-year), Consensus: 3.4%

U.K. PMI's • Thursday
Economic growth in the United Kingdom has slowed recently. Indeed, the sequential rate of real GDP growth slowed from 0.6 percent (not annualized) in the fourth quarter to 0.4 percent in the first quarter. Next week will provide some insights into the state of the British economy in the second quarter.

The manufacturing PMI is hovering just above the demarcation line that separates expansion from contraction. Will it slip into negative territory in April? The behavior of the construction PMI indicates that activity in the construction sector is already contracting. Data on house prices, the money supply, consumer credit, and consumer confidence will also shape investor expectations about the outlook for the U.K. economy this year.
Previous Manufacturing: 51.3 Consensus: 50.8
Previous Construction: 47.2 Consensus: 47.0

Interest Rate Watch
Fed: 0 or 25?
The Fed holds a regularly scheduled policy meeting next week. Whereas a few weeks ago most investors expected that the FOMC would contemplate either a 25 bp or 50 bp rate cut, the consensus seems to have shifted to no more than a 25 bp cut. Indeed, a few market participants think the FOMC may keep policy unchanged next week.

An argument in favor of no further easing is the string of recent data, which suggests the economy is not completely falling apart. GDP data, which will be released on the day the FOMC meets, likely will show that growth was positive, albeit very weak, in the first quarter. In addition, CPI inflation, which remained at 4.0 percent in March, is well above the rate that every FOMC member deems consistent with price stability.

There are two principal arguments to cut the target for the fed funds rate by 25 bp. First, the U.S. economy is by no means "out of the woods" and growth likely will remain sluggish for the next few quarters. Further easing, therefore, may very well be appropriate. Second, LIBOR rates, which serve as benchmarks for many other short-term interest rates, remain elevated. Cutting the fed funds rate further may help to bring those other short-term interest rates down.

In our view, the FOMC will cut rates by 25 bp on Wednesday. Most investors look for a 25 bp rate cut, and markets could become dysfunctional again if the FOMC does not deliver a rate cut. That said, we also believe the FOMC will make it clear in its statement that it intends to go to a wait-and-see mode. The tax rebate checks will be mailed next month, and the Fed likely wants to see how much is spent before deciding what to do next.

Rice or Egg roll? (Please Say Egg Roll)
It was almost impossible to miss the coverage of high rice prices in the media this week. The impact of rice shortages and high prices can have a devastating impact on developing nations where rice is a staple food product. In the U.S., warehouse stores are setting limits on rice purchases as business owners stock up - fearing that the run-on-rice will translate into higher input costs for their restaurants or foodservice business.

The price increases were initially attributed to a few countries paring back exports as they feared some crop reports which suggested a lean year for the staple grain. Then India announced an outright ban on rice exports. Soon after, Vietnam a country who competes with India as the world's second largest exporter of rice followed suit. These bans on exports touched off a wave of stockpiling and hoarding the world over, tripling rice prices in a matter of weeks. Thailand, the world's largest exporter of rice drew praise from the World Bank by refusing to impose any sort of export restriction on rice.

While rice shortages are likely overstated and the current hysteria around them is certainly both irrational and destructive, there are some lessons here. Increased global demand for food has developed at the same time that input prices used to grow food are climbing. Gas, oil, and fertilizer are all used to plant, harvest and transport food, and they all cost a lot more than previously. These prices will have to be passed on to a global consumer base with a growing appetite. So is this rice story overstating this increased-demand increased-cost story? In the short term: yes. But food prices will remain an issue in the global economy in the years ahead

Saxo Bank

Bank Of Canada Decision On Tap Today
The market still seems to be scratching about for ideas as yesterday saw continued unwinding of Friday's moves to risk willingness. It seems that the best way to trade this market is to wait for it to get excited about something and then fade the move as themes don't seem capable of following through and becoming real trends. Liquidity is very poor at the moment.

The Bank of England announced the specifics of the lending facility designed to ease credit conditions in the mortgage market after the recent record low RICS house price balance data. The market clearly found the measures insufficient for now and GBP performed a whiplash reversal that wiped out much of its recent gains. Some believe that the GBP 50 billion amount of the facility is insufficient to ease the pain while others pointed out that the facility will only reduce credit spread if all of the banks rush in to use it. In other words - the market isn't sure of the impact and the choppy GBP charts certainly reflect that. Still, the damage is at least partially done on the EURGBP uptrend and the pair may continue to chop around in a wide range.

The Bank of Canada is out today with a key interest rate decision. A slim majority in the market are looking for a 50 bp cut to bring the rate to 3.00%. With the market undecided on what Carney and company at the BOC will do, we would expect that today's decision. One problem remains conflicting pressures on CAD. Recent risk willingness and record oil prices have been a boost to the loonie, while the interest rate differentials of late suggest strong pressure for a weaker CAD vs. the USD. The pair has twice grazed close to the parity mark recently but may have a hard time falling through if the 50 bp cut materializes today. To the upside, there's an awful lot of resistance we need to chop through before we can start to discuss a new uptrend, but the bigger perspective still suggests more upside than downside potential for this pair - especially above the 1.0380 level. The BoC would definitely like a weaker CAD, so a 50 bp cut is the only way to go for that eventuality.

We'll watch the US Existing Home Sales data and weekly consumer Confidence data today with interest . We wonder if the existing home sales reading might be even worse than expected considering the tightness of credit in March, though it will take a truly horrific number to surprise the market considering the already steep downtrend for this indicator. With a strong acceleration in gasoline prices over the last week and likely general pessimism at the increasingly mudslinging democratic primary struggle, another new near 15-year low for the weekly ABC consumer confidence reading may be in the wings.

Northern Trust

Wholesale Sale Prices Stoke Concerns of Hawks, but Inflation is a Lagging Indicator

The Producer Price Index (PPI) for Finished Goods advanced 1.1% in March following gains of 1.0% and 0.3% in January and February, respectively. The PPI for finished goods has risen at an annual rate of 10.2% in the first three months of 2008 vs. an 11.5% increase in the fourth quarter of 2007 and a 6.3% gain in all of 2007.

This noticeable increase in wholesale prices in the first three months of the year reflects sharply higher prices for food (+10.1%), energy (+22.5%), and that of core items excluding food and energy (+5.0%). In March, the energy price index rose 2.9% and the food price index moved up 1.2%. Although prices of gasoline and natural gas rose at a slower pace than in February, prices of heating oil, liquefied petroleum, and residential electric power all turned up in March after posting declines in February. Fruits, vegetables, chicken, and beef were some of the food items carrying a large price tag in March compared with February.

Prices of new cars and trucks fell in March, but there were several other gains among core items, such as higher prices for drugs, alcohol, soaps, civilian aircraft, and pet food that helped to raise the core PPI, which excludes food and energy, to 0.2% in March. The acceleration of the core PPI to 5.0% in the three months ended March is supportive ammunition for the hawks in the FOMC. But, inflation is a lagging indicator which peaks long after an expansion in economic activity has ended. The expectation is that a moderation in inflation will emerge as the economy slows in the next few months.

At the earlier stages of production, the PPI of intermediate goods rose 2.3% and that of core intermediate goods advanced 1.1%. The year-to-year change in the intermediate goods price index at 2.73% in March is the highest since July 2005. Prices of crude goods also increased in March.

Finotec

Forex Depth Analysis: AUD/USD

Aussie Looks In A Range Although Technical Shows End Of Momentum
The Australian dollar rose on Tuesday as signs of stability in equity and credit markets led some investors back to higher-yielding currencies, even as fresh data showed more weakness in the Australian economy.

The Aussie rose against the yen on the renewed appetite for risk, but lost a bit of steam later in the day as major Asian share markets extended losses.
A survey showing a sharp deterioration in Australian business conditions in March didn't move the Aussie, with analysts saying investors have already priced out any chance of a further interest rate rise, while a cut is seen as a long way off.

The buying point is at 0.9315; based on a break of a strong resistance.
* Previous resistance is the take profit at 0.9411
* Fibonacci 28.6% is the stop loss at 0.9242

The selling point is at 0.9270; based on a double top formation.
* Fibonacci 38.2% is the take profit at 0.9214
* Previous resistance is the stop loss at 0.9308

To strengthen our analysis; we use many other indicators, starting with MACD (Moving Averages convergence divergence); we notice the crossing of MACD line to the signal line. In order to find the power of the market, we use RSI (Relative Strength Index).With RSI; we can determine that the market is in a bearish direction.

The momentum oscillator is very important to understand the strength of the market and as we see on the graph it is in a downtrend and breaks the zero level. Stochastic oscillator crosses %D line and breaks 80% level and continues to go lower.

Global Forex Trading Ltd

The dollar rallied on Thursday and the decline in commodities hurt the AUD, NZD and CAD. Again, the odds that the dollar bottomed are good, but today should be quiet with Europe, Canada and (almost) us closed for Good Friday.

Euro/dollar
Euro/dollar sank further on Thursday and a peak is probably in place. More weakness will help. Immediate support is now at 1.5400. Below 1.53, there is further support at 1.5285. Initial resistance is at 1.5470. The next level is 1.5520. Above 1.5590, resistance now comes at 1.5665.

Oscillators are declining.
NEAR-TERM: Bearish
MEDIUM-TERM: Mixed
LONG-TERM: Bullish

Dollar/yen
Dollar/yen struggled higher within an inside range. Choppy trading is likely today. Initial support comes at 99.00. This is followed by 98.46. Distant support is at 95.75. Immediate resistance is now seen at 100.25 from a 50-point pivot, which targets 99.75 and 100.75. Above 100.45, the next levels are seen at 101.25 and 101.90.

Oscillators are mixed.
NEAR-TERM: Mixed
MEDIUM-TERM: Mixed
LONG-TERM: Bearish

Sterling/dollar
Sterling/dollar recouped early losses to close mixed on Thursday. Sideways trading should dominate today. Initial resistance now comes at 1.9910. This is followed by 2.0005. A break above 2.0085 would signal another further rally to 2.0250. Immediate support is now seen at 1.9835. This is followed by 1. 9765. Below 1.9690, the next level follows at 1. 9585.

Oscillators are falling.
NEAR-TERM: Mixed
MEDIUM-TERM: Mixed
LONG-TERM: Mixed

Dollar/Swiss franc
Dollar/Swiss marched higher on Thursday, as expected. My model is long and the upside is favored, but today should be quiet. Initial resistance is now at 1.0165. This is followed by 1.0200. The next level is 1.0320. Immediate support is seen at 1.0040. Below 0.9965, distant support is now pegged at 0.9870.

Oscillators are rising.
NEAR-TERM: Mixed
MEDIUM-TERM: Bearish
LONG-TERM: Bearish

Crown Forex

Correction Across...OR???
The dollar comeback was again based on major's correction rather than change of investors' rhetoric, profit taking and position alteration is seen ahead of the long weekend as traders what to take the chance from the short-term downside wave to initiate a stronger upheaval from the bottom providing more momentum to majors to reclaim their records.

Europe's united currency, the euro, is heading for its fourth day of losses against the dollar, marking the first come back for the dollar on a weekly basis after five consecutive weeks of massive losses. If we take Fibonacci Retracement for the weekly wave from the bottom at 1.4440 till the this week's top at 1.5902 we find that the euro is heading to the solid support barrier where good demand is palace which is resembled by 38.2% level at 1.5346.

Today the Euro managed to decline from the opening levels high at 1.5640, and after breaching the minor support at 1.5580s it extended the downside to breach the first Retracement level of 2.36% at 1.5557, the early German good data and followed by Euro Zone PMI services and manufacturing flash PMI which came almost inline with expectations did not halt the key reversal pattern the euro has formed; euro area fundamentals are still sound and for that despite the short-term correctional wave the 15 nation currency remain to have a much higher edge against the dollar. The intraday low was set at 1.5436, while still remaining above the 20 Days MA at 1.5410s is still holding the pair, yet if breached the euro will continue the wave to the mentioned 38.2% level.

Sterling has lost its upside momentum against the dollar since yesterday's incoming fundamentals from UK; adding to the MPC split and the actions taken by the bank to auction liquidity to ease tightened markets, rumors have had their toll much more empowering further expectations of a sooner than expected rate cut to be next meeting rather than May. The BoE had to dismiss gossip once more concerning a leading UK bank that was tabbing emergency funding aster deteriorating liquidity, the FSA are investigating the issue as they see that speculators are heading to indulge in such gossip in the market for their own benefit and that was the main driver for Bear Stearns fallout as it led to huge withdrawals that crunched their financial status, and ended in the hands of JPMorgan.

The pound weakened against the dollar breach the $2 barrier, and after yesterday it managed to beach the major support level at 1.9878 and with closing below the level the downside wave was extended as today's low as set at 1.9735 where it still managing to contain the pair as the area among 1.9750s-1.9730s provides good demand on the pair. Yet with both outlooks for the pound and the dollar being week the pair lacks driving momentum and remains the solid change in stance that might help the pair breach the restrictive area its now trading within among 1.9880s-1.9730s and despite today's stronger than expected retail sales sterling did not convict investors to alter their sentiment, and for that any key defining pattern for the pair will be adjusted in next week's opening as traders comeback clear headed after a long weekend.

Risk aversion, remains the key driver to the Japanese currency, as the dollar's weakness is also adding to downside pressures on the medium to long-term trend; the Japanese economy has yet to reflect their effect form market turmoil and the US economic slowdown which is a major trading partner of theirs and they might clearly their exports as Japan accounts much on that sector, especially adding to their sorrow is the yen's massive appreciation in a recent period of time.

Today the pair is trading among marginal level which if breach will confirm the upcoming wave as the low volume of trade is confining the pair among 100.50s-98.60s, the pair was seen upside bias since the European session recording the high at 100.20 while failing to pursue the upside the pair now trades near 99.50s and again a successful breach to the mentioned range needs to be seen to set the upcoming trend either extended the upside reversal or initiating a new downside wave which will take the dollar again to it almost 13-year lows at 95.00 levels with high volume...

GCI Financial

€ (EURO)
The euro moved higher vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.5785 level and was supported around the $1.5610 level. The Federal Open Market Committee reduced the federal funds target rate by 75bps to 2.25% and lowered the discount rate by 75bps to 2.50%. Fed policymakers reported “Recent information indicates that the outlook for economic activity has weakened further. Growth in consumer spending has slowed and labor markets have softened. Financial markets remain under considerable stress, and the tightening of credit conditions and the deepening of the housing contraction are likely to weigh on economic growth over the next few quarters. Inflation has been elevated, and some indicators of inflation expectations have risen. The Committee expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization. Still, uncertainty about the inflation outlook has increased. It will be necessary to continue to monitor inflation developments carefully. Today's policy action, combined with those taken earlier, including measures to foster market liquidity, should help to promote moderate growth over time and to mitigate the risks to economic activity. However, downside risks to growth remain. The Committee will act in a timely manner as needed to promote sustainable economic growth and price stability. Dallas Fed President Fisher and Philadelphia Fed President Plosser dissented and wanted less than a 75bps monetary easing. Traders are paying very close attention to the financial markets, interbank funding rates, etc. to determine if stresses on the financial system are lessening. In eurozone news, the EMU-15 trade deficit registered -€10.7 billion in January, the largest imbalance since the euro's inception in 1999 and worse than December's €4.1 billion level. Germany's HWWI institute lowered its 2008 GDP forecast to below 1.5% from the previous estimate of 1.7%. European Central Bank member Weber said financial institutions should enhance their transparency by “disclosing the extent of writedowns.” G7 policymakers will convene in Washington, D.C. on 11 April and the recent market turmoil is expected to be high atop their agenda. Euro bids are cited around the US$ 1.5610 level.

¥/ CNY (JPY)
The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥97.65 level and was capped around the ¥100.45 level. Bank of Japan will name Masaaki Shirakawa, a new Deputy Governor, to temporarily assume the role as Governor following today's retirement of Governor Fukui. Opposition lawmakers have been unable to agree on a suitable replacement for Fukui and this renders it likely the top slot will be vacant for the first time since World War II. The Japanese government downgraded its economic assessment for the second consecutive month, citing stagnant industrial production and capital spending and weak private consumption. The Nikkei 225 stock index gained 2.48% to close at ¥12,260.44. Dollar offers are cited around the ¥102.05 level. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥157.00 figure and was supported around the ¥154.05 level. The British pound and Swiss franc weakened vis-à-vis the yen as the crosses tested bids around the ¥195.80 and ¥98.90 levels, respectively. The Chinese yuan appreciated sharply vis-à-vis the U.S. dollar as the greenback closed at CNY 7.0630 in the over-the-counter market, down from CNY 7.0815, the pair's lowest close since the yuan revaluation on July 2005.

₤ (GBP)
The British pound fell sharply vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.9920 level and was capped around the $2.0150 level. Sterling fell sharply on market rumours that a major financial institution in the U.K. is having financial difficulties. Attention is focused on HBOS Plc, a bank that is putatively in trouble whose shares fell 10% today. Bank of England denied market reports that officials have canceled their Easter breaks to remain in London and deal with the capital markets crisis. Minutes from the BoE Monetary Policy Committee's March policy deliberations were released today and they confirmed that Deputy Governor Gieve joined archdove Blanchflower in voting for a 25bps rate cut. Dealers believe there may be increasing momentum for a rate cut in April or May. Data released in the U.K. today saw the CBI's March monthly industrial trends survey report the balance of manufacturers reporting above-normal order books rose to +7% from +3% in February. Also, February unemployment declined for the seventeenth consecutive month but the drop in the claimant count of 2,800 was the smallest since October 2006. Cable bids are cited around the US$ 1.9720 level. The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.7880 level and was supported around the ₤0.7770 level.

CHF
The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 0.9870 level and was capped around the CHF 1.0050 level. The pair retraced some of the gains it made yesterday following the Fed's decision to ease interest rates. U.S. dollar offers are cited around the CHF 1.0105 level. The euro and British pound came off vis-à-vis the Swiss franc as the crosses tested bids around the CHF 1.5570 and CHF 1.9785 levels, respectively.

A$/ NZ$ (AUD & NZD)
The Australian dollar moved higher vis-à-vis the U.S. dollar today as the Aussie tested offers around the US$ 0.9355 level and was supported around the $0.9260 level. Data released in Australia overnight saw Q4 housing starts up 2.6% while February merchandise goods imports were up 0.3%. Also, the Westpac leading index of economic activity fell 0.1 points in January and the March skilled vacancies index was off 2.2% m/m in March. Australian dollar bids are cited around the US$ 0.9120 level. The New Zealand dollar gained ground vis-à-vis the U.S. dollar as the kiwi tested offers around the US$ 0.8170 level and was supported around the $0.8065 level. New Zealand dollar bids are cited around the US$ 0.7895 level.

C$ (CAD)
The Canadian dollar lost ground vis-à-vis the U.S. dollar today as the greenback tested offers around the C$ 0.9995 level and was supported around the C$ 0.9875 level. Data released in Canada today saw January wholesale trade increase 2.6%, reversing December's 2.6% decline. U.S. dollar offers are cited around the C$ 1.0080 level.

GCI Financial

Euro €
The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.5690 level and was supported around the $1.5530 level. The common currency established a new lifetime high today as traders reacted to news that JPMorgan Chase and the Federal Reserve Bank of New York are providing 28-day funding to U.S. investment bank Bear Stearns. Bear announced that liquidity evaporated yesterday and traders are sensitive to any additional funding shortfalls by U.S. financial institutions. The fed funds futures markets is currently discounting about a 66% chance the Federal Open Market Committee will reduce the federal funds target rate by a cumulative 125bps over the next two meetings, but many dealers believe interest rate expectations may have gotten ahead of themselves. Data released in the U.S. today saw the University of Michigan consumer sentiment index fall to 70.5 from 70.8 in February. Also, February consumer price inflation data came in on the tame side with the headline and core rates both unchanged m/m and below expectations. A moderation in inflation pressures will provide the Federal Reserve with more scope to ease monetary policy. Headline CPI was up 0.4% y/y and 2.3% y/y. In eurozone news, EMU-15 consumer price inflation was upwardly revised to an all-time high of 3.3% for February and this will keep the European Central Bank on the offensive as far as inflation is concerned. Traders are paying very close attention to a summit of European Union officials and the communiqué they will issue. Officials are expected to verbally intervene against disorderly exchange rate movements and their meeting only increases chances of a concerted global intervention to support the U.S. dollar. Other data released in the eurozone today saw EMU-13 Q4 labour costs up 3.5% y/y while German final February CPI was up 0.5% m/m and 2.8% y/y. Also, EMU-13 Q4 2007 wages were up 2.9% y/y. Euro bids are cited around the US$ 1.5145 level.

Yen ¥/ CNY
The yen extended recent gains vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥99.55 level and was capped around the ¥101.15 level. The pair reached levels not seen since 1995 as heightened risk aversion dampened demand for U.S. assets and led to further unwinding of the short yen carry trade. Finance minister Nukaga and Economy minister Ota verbally intervened today to counter the yen's appreciation. The Fukuda government may put forth a candidate other than Muto to succeed Bank of Japan Governor Fukui when he retires on 19 March. Muto's nomination has essentially been blocked by the Upper House of parliament and a compromise candidate is expected to be named. The Nikkei 225 stock index lost 1.54% to close at ¥12,241.60. Dollar offers are cited around the ¥101.85 level. The euro weakened vis-à-vis the yen as the single currency tested bids around the ¥156.05 level and was capped around the ¥157.60 level. The British pound and Swiss franc came off vis-à-vis the yen as the crosses tested bids around the ¥202.85 and ¥99.20 levels, respectively. The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 7.0894 in the over-the-counter market, down from CNY 7.0900, the pair's lowest close since the yuan revaluation of July 2005. Data released in China today saw January-February urban fixed-asset investment up 24.3% y/y.

GBP ₤
The British pound appreciated vis-à-vis the U.S. dollar today as cable tested offers around the US$ 2.0395 level and was supported around the $2.0210 level. The pair reached its highest level since 14 December 2007. Prime Minister Brown said people are "concerned" about excessive volatility in the foreign exchange markets. Cable bids are cited around the US$ 1.9910 level. The euro moved lower vis-à-vis the British pound as the single currency tested bids around the ₤0.7665 level and was capped around the ₤0.7695 level.

CHF
The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 0.9990 level and was capped around the CHF 1.0140 level. The pair moved below parity as traders moved into francs on account of escalating risk aversion and an unwinding of the short Swiss franc carry trade. Swiss National Bank Hildebrand said financial market turbulence is likely to continue. SNB kept interest rates unchanged yesterday. U.S. dollar offers are cited around the CHF 1.0105 level. The euro and British pound weakened vis-à-vis the Swiss franc as the crosses tested bids around the CHF 1.5670 and CHF 2.0360 levels, respectively.

GFT Analyst

Until today the market has failed to follow-through on the Dollar’s downside to any significance beyond Monday’s early collapse. Today has a few releases up for grabs but little of any substance to move rate significantly from Europe.

After a day off yesterday we are seeing some potential movers from the States in the factory orders, ISM non manufacturing and some preliminary private employment measurements. The latter will lead into the non farm payrolls from the States on Friday. The Fed is also due to publish the Beige Book later today.

In addition tomorrow we have the ECB and BOE rate decisions although these are almost certainly going to see no changes but still it should keep the Dollar in tighter ranges today pending the U.S. releases later.

However, we should note that the market failed to take advantage of some quite negative comments from several Fed officials and therefore we shouldn’t discount a significantly lower Dollar again today. There are some downside risks

Technically there is still room for declines to 1.5322 Euro, 1.0216 Swissie and 101.67-82 Yen. However, a decent correction appears overdue.

Neither should we forget that there has been increased rhetoric from the ECB and IMF on the excessive weakness of the Dollar with Trichet calling on U.S. officials to do something about the plunging Greenback.

Concerted intervention? Maybe.
It is an action that has been sidelined for several years but times are tough and the pressures now facing the States are substantial and while a sliding Dollar may make U.S. exports cheaper it also agitates the inflationary pressures and this is something that will make the Fed’s actions more complex.

Such a move would find welcome interest from Japan which is suffering not only from lower global demand but also from the effective rise in pricing with the Dollar down 20% from last year’s 124.13 peak.

The ECB would probably welcome the move also. Its officials have been bemoaning the strength of the Euro and the instability makes it tougher for the CB to hike rates to counter-act inflationary pressures.

The second half of the week should prove a lot more interesting than the first…

Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSD
Res: 104.74-92 1.5322-50 1.0525-64 1.9971-06
Res: 103.69-92 1.5238-75 1.0425-56 1.9900-10

Spt: 102.60-93 1.5120-56 1.0375-85 1.9783-10
Spt: 101.67-82 1.5000-22 1.0280-07 1.9666-00

Finotec

The dollar held steady against the yen on Tuesday, getting some respite after hitting a six-week low last week on poor U.S. jobs data that bolstered expectations for an aggressive Federal Reserve rate cut. The dollar is trading around the levels of 1.4700 against the Euro, around the levels of 109.45 against the Yen and around the levels of 1.9795 against the Sterling.

The dollar has staged a slight rebound this week as some traders were disappointed the weak payrolls report did not spark a deeper retreat in the U.S. currency, prompting them to reverse short positions."Market players have been forced into short-covering after selling dollars aggressively," said a senior trader for a major Japanese trading house. "The dollar could rebound due to technical factors," the trader said.

The yen slid against the euro and high-yielding currencies as stability in Asian equity markets eased risk aversion and prompted investors to step back from unwinding carry trades. The dollar stood at 109.35 yen as of 0600 GMT, up slightly from late U.S. trading on Monday. The dollar hit a trough of 107.90 yen on Friday on electronic trading platform EBS, the lowest in nearly six weeks.

The euro edged up to $1.4705, pulled up by its gains against the yen, but remained below Friday's EBS high of $1.4825, which was the highest for the euro since late November. Sterling was up 0.1 percent to $1.9715, recovering from a 4-1/2-month low of $1.9653 hit on Monday, but weighed by weak data underscoring expectations for further monetary easing by the Bank of England.

Global Forex Trading Ltd

Euro/dollar
Euro/dollar challenged its record high before giving up some of the gains. After another recovery today the selloff should resume as the pair is overbought. Immediate resistance is at 1.4751. Above it, resistance is seen at 1.4835. Initial support is at 1.4590. This is followed by 1.4520 and 1.4470. Below 1.4415, euro/dollar has distant support comes at 1.4290.

Oscillators are mixed.
NEAR-TERM: Slightly bullish
MEDIUM-TERM: Bullish
LONG-TERM: Bullish

Dollar/yen
Dollar/yen made another recovery on Wednesday, but the pace decelerated. Expect mixed trading but the risk here remains that a bullish engulfing formation is already in place. Immediate resistance is at 111.60 from a 50-point pivot, which targets 112.10 and 111.10. Initial support now comes at 111.000. Strong support is at 110.35 from a 50-point pivot that targets 109.85 and 110.85. Distant support follows at 109.15 from another 50-point pivot that targets 109.65 and 108.65.

Oscillators are mixed.
NEAR-TERM: Mixed
MEDIUM-TERM: Bearish
LONG-TERM: Mixed

Sterling/dollar
Sterling/dollar fell to a nearly three-week low on Wednesday after the BoE warned it might cut rates next year. Next year is clearly not today, so a bounce is now likely. Initial resistance is at 2.0587. This is followed by 2.0680. Further resistance is at 2.0805. Immediate support is now seen at 2.0455 Below 2.0410, the next level is at 2.0315.

Oscillators are mixed.
NEAR-TERM: Slightly bullish
MEDIUM-TERM: Mixed
LONG-TERM: Bullish

Dollar/Swiss franc
Dollar/Swiss sank to a new low for the downtrend on Wednesday before trimming losses. The oversold currency should edge further down today. Immediate support is at 1.1177. Below it, support is now pegged at 1.1100. Distant support is at 1.0980. Initial resistance is at 1.1290. This is followed by 1.1335. Above 1.1400, there is resistance at 1.1530.

Oscillators are falling.
NEAR-TERM: Slightly bearish
MEDIUM-TERM: Mixed
LONG-TERM: Bearish

I am sorry

I am sorry for not update for a month during my connection problem and others. Thanks for my reader that keep checking my blog, and i will update it start today.

Northern Trust

That’s the rallying cry of the economic bulls. Aside from the fact that jobs and personal income are coincident indicators, not leading indicators, and that labor compensation as a percent of consumer spending tends to rise just before the onset of recessions (see Payroll Growth = Consumer Spending Growth? ), will jobs and income growth alone be enough to sustain real consumption growth going forward? That is, with mortgage equity withdrawals drying up and corporate buybacks and private equity buyouts slowing down, suppose that consumer spending relative to disposable income reverts to its mean. What rate of growth in real consumer spending could we look forward to in 2007?

Chart 1 shows real personal consumption expenditures (PCE) as a percent of real disposable (after-tax) personal income (DPI). For the years 1947 through 2006, the average percentage was 92.3. From 1993 on, consumption as a percent of disposable income has been above average. In 2006 it was 95.80%. Chart 2 shows the year-to-year change in real DPI. The compound annual rate of growth real DPI from 1947 through 2006 was 3.52%. In the six years ended 2006, year-to-year DPI growth has been below 3.52% except for 2004 (3.61%).

Remember that Hewlett-Packard commercial of a few years ago, “What if?” What if in 2007 real DPI grew at 3.52% -- faster than its 2.75% compound annual growth in the past five years -- but real PCE fell back to its long-run average of 90.23% of real DPI? What would growth in real PCE be in 2007 vs. 2006? Growth? There would be no growth. Instead, under this “what if scenario,” real PCE would contract by 2.5%.

There is little doubt, in my mind anyway (see Wealth Effect or Borrowing/Asset Sales Effect? ), that the higher ratio of consumer spending relative to disposable personal income has been the result of increased household borrowing using residential real estate as collateral and the sale of household direct and indirect holdings of corporate equities to corporations and private equity syndicates. If households had to depend only on their income from employment and other sources to fund their consumer spending, we would observe much slower growth in consumption expenditures. So, those who keep harping that “the consumer” will be just fine so long as there is job and income growth ought to do some “what ifs.”

The ISM Manufacturing Survey vs. Actual Factory Production
The ISM manufacturing survey for July will be published on August 1. The consensus is for an unchanged reading of the composite index at 56.0. This index hit 49.3 in January, reversed the downward trend in the following month, held above 50.0 in March and it has been advancing consistently in each of the three months ended June. The production index (49.6) touched below 50.0 in January but it has advanced and held above 50.0 in the last three months, with the June reading at 62.6. Historically, a pickup in the production index is associated with growth in factory production.

True, factory production is growing but at a decelerating trend (see chart 4). The year-to-year change in factory production appears to have peaked in September 2006. The softness in factory production is a troubling feature and it is not consistent with the message from the ISM manufacturing survey in the current cycle. We are looking forward to the ISM survey results of July to sort out the mixed message.