Forex Market Issues and Risks

US trade deficit and weaker stocks weighed on Dollar

News and Events:

The Dollar climbed to fresh one-year peaks against the Euro and a major currency basket on Thursday, as nervous investors sought refuge in the greenback's safety amid escalating global slowdown fears.

The low-yielding Japanese yen also benefited from a surge in risk aversion, pushing the Euro and the Australian and New Zealand Dollars to their lowest in at least two years. Investors had used the Yen in carry trades to purchase high-yielding currencies in times when global growth was accelerating and risk appetite was high. Analysts said the uncertain global economic outlook was prompting US investors to liquidate assets in emerging markets, where inflation was also becoming a problem.

EurUsd dropped to 1.3882 low yesterday, it's lowest since September 2007. It was last trading up 0.51% at 1.4041. UsdJpy was 0.23% lower at 107.16 after hitting 106.07 intraday low. UsdChf posted 1.1418 new high before reversing at 1.1367, down 0.22%. GbpUsd rose 0.34% to 1.7558. EurJpy fell to 147.53; it's lowest since late August 2006. It was last at 150.11, down 0.27%.

Late on Thursday, the Dollar dropped against majors weighed down by a combination of weaker global stocks and data showing the US trade gap expanded to $62.2b, it's widest since March 2007.

Aside from the Dollar, the Yen has been the best performing currency over the past month among developed currencies, with much of its gains coming on the crosses, notably against the high-yielders such as the Australian and New Zealand Dollars. The Yen fell to more than two-year lows against both the Australian and New Zealand Dollars to 84.08 and 68.54.

Today Key Issues:

• 09:00 EUR July Euro-zone Industrial production -0.2% vs 0% (mom)
• 09:00 EUR July Euro-zone Industrial production -0.7% vs -0.5% (yoy)
• 12:30 USD August Producer Prices -0.5% vs 1.2% (mom)
• 12:30 USD August Producer Prices core 0.2% vs 0.7% (mom)
• 12:30 USD August Retail Sales 0.2% vs -0.1% (mom)
• 12:30 USD August Retail Sales ex-autos -0.2% vs 0.4% (mom)
• 14:30 CAD Q2 Capacity utilization 79.3% vs 79.8%
• 13:55 USD Sept University of Michigan Conditions prel 71.7 vs 71
• 13:55 USD Sept University of Michigan expectations prel 58.3 vs 57.9
• 13:55 USD Sept University of Michigan sentiment prel 64 vs 63
• 14:00 USD July business inventories 0.5% vs 0.7%

The Risk Today:

EurUsd Market dropped as low as 1.3882 yesterday. Further weakness will put the focus on strong support 1.3666 December 2004 high and 1.3056 support (retracement of 0.8231 - 1.6039 advance). On the upside, only a return over 1.5000 and 1.5500 will release actual pressure and put key initial resistance 1.6000 into focus. Still a break up there would open the way to Trendline resistance 1.6200.

GbpUsd Cable dropped to 1.7447 low yesterday. Market may find support on 1.7422 (50% retracement of 1.3682 - 2.1161 advance). Strong support holds 1.7251 3rd April low. On the upside, initial resistance holds 1.7976 8th September high. Strong resistance holds 1.8795 21st August high. Former support 1.9363 holds also strong resistance. Key level holds 2.0100 resistance.

UsdJpy Market tested last week the 6-month lower trend line support at 106.50. It posted 105.53 low on Friday. Further pressure may open the way toward 105 pivot (38.2% retracement of 95.75 - 110.67 advance), as well as 102.73 support and 100 pivot point. Initial support holds 105 strong support. Initial resistance holds 109.08 Monday high.

UsdChf Market rose as high as 1.1418 yesterday. Strong resistance holds 1.1593 December 2007 high. On the downside, initial support holds 1.0863. Only renewed weakness below 1.0500 and 1.0375 would retest the 1.0000 pivot point and may open the way toward 0.9637 17th March low

ACM FOREX

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