NEWS / Foreign Exchange

The US economic calendar will begin on Tuesday with the release of the consumer confidence report for October

Past Week's Data and Events

The dollar weakened last week versus the European and commodity currencies but marked time against the yen, amid concerns about the speed of deceleration of the US economy following the subprime mortgage disaster. Enhanced chatter that the US is going to attack Iran??™s nuclear capabilities sent oil prices through stratosphere and if it doesn??™t decline quickly, the world economy will start to suffer sooner rather than later. Bottom line, carry trades are alive as well and there is little reason to change this strategy.

United States

The dollar was pummeled by the commodity currencies, out of which the New Zealand and Australian dollars also benefit from high yields. While the rest of the industrialized world is looking for ways to hide, minimize and deal with the disaster stemming from the excess of the subprime mortgage derivatives, China is holding the course of its fast-paced industrialization. This means it will continue to suck in any commodities available from the standard producers plus any other African nation with anything underground. The European currencies were much less impressive, while yen remained the docile funding currency with a close to non-existent interest rate.

The oil and gold prices will recess only if Iran doesn??™t get hit.

Major financial houses were forced to admit to enormous losses and this suggests that the Federal Reserve will cut rates on Wednesday. The question is 25 or 50 basis points?

The economic data was mixed to poor ??“ and it shouldn??™t get better anytime soon, particularly with large financial banks starting to fire people.

Durable goods orders down fell surprisingly by 1.7 percent in September due to a decline in transportation orders after a downwardly revised 5.3 percent decline in August. Transportation equipment orders fell 6.3 percent because of a 37.3 percent slide in defense aircraft and parts orders. Ex-transportation, orders rose 0.3 percent from ??“1.8 percent. Excluding defense orders, orders rose 0.7 percent after ??“6.2 percent. Non-defense capital goods orders excluding aircraft rose 0.4 percent from -0.1.

Jobless claims fell to 331,000 latest week from an upwardly revised 339,000.

The housing sector data was mixed, but no one can dream a real recovery any time soon.

The dollar recovered briefly on news that sales of new homes unexpectedly rose 4.8 percent to an annual rate of 770,000 in September after the report for August was revised downward to an 11-year low of 735,000 (from 795,000). But sales contracted 23.3 percent from September 2006.

Sales of previously owned homes fell a more than expected 8 percent to an annual rate of 5.04 million in September from a 5.48 million August pace, according to the National Association of Realtors.

The share of homes owned but empty rose to 2.7 percent in the third quarter from the 2.6 percent reported in the second quarter.

The final University of Michigan Survey of consumer sentiment fell to 80.9 to October from the preliminary reading of 82 and the final September reading of 83.4. This was the lowest reading since May 2006.

The Eurozone

The euro/dollar rallied to a new lifetime high and its steady increase should continue.

News that the German confidence slipped did not stop the euro from advancing on Thursday. The Ifo research institute??™s business climate index fell to 103.9 in October from 104.2 in September. The sub-index of current business conditions fell to 109.6 from 109.9 in September while the sub-index of expectations declined to 98.6 from 98.7.

Along these lines, German consumer confidence fell to 4.9 in November from 6.7 in October according to the Gfk.

Meanwhile, French business confidence fell to 108 in October from a revised 109 in September.

The German government cut its forecast for economic expansion in 2008 to 2 percent from 2.4 percent, due to slowing export growth.

French consumer spending on manufactured goods rose 0.1 percent in September and the report for August was revised down to 0.7 percent from a previously reported 1.0 percent.

The Eurozone PMI services index rose to 55.6 in October from 54.2 in September, while the PMI manufacturing index fell to 51.5 from 53.2, the lowest since August 2005.

Italian business confidence unexpectedly rose to 92.9 in October from a revised 92.4 the previous month. Meanwhile, Italian consumer confidence in October was unchanged from the previous month??™s 107.3.

Japan

Dollar/yen continued to trot in place last week and the data carried no weight for this carry trade funding vehicle.

Japan's trade surplus surged 62.7 percent to a record 1.64 trillion yen in September from a year earlier. Exports rose 6.5 percent and imports fell 3.2 percent.

The Japanese CPI fell 0.2 percent in September on a yearly basis while the core CPI fell 0.1 percent. The annual CPI rate for the Tokyo area rose 0.1 percent in October, while the core was flat

Industrial production contracted a larger than expected -1.4 percent in September.

The UK

The pound made a choppy upmove last week.

The pound rallied on Tuesday despite news that the CBI manufacturing order books balance fell to -6 from +6 in September.

Canada

Dollar/Canada remained under selling pressure and coined yet another low for its downtrend.

Canadian retail sales rose 0.7 percent in August, faster than economists expected, led by new car dealers as domestic spending picked up for the first time since May.

Switzerland

Dollar/Swiss pushed lower last week.

Australia

The Aussie/dollar surged to a new high for its stubborn uptrend last week.

Australia's inflation slowed to 0.7 percent from the second quarter, when it jumped 1.2 percent. Prices climbed 1.9 percent from a year earlier. The core inflation rate climbed 1 percent from the second quarter, the biggest increase since 1991, and 3.1 percent from a year earlier.

This Week's Data and Events

United States

The US economic calendar will begin on Tuesday with the release of the consumer confidence report for October.

Wednesday will see the release of the Chicago PMI report for October, the revision of the GDP for the second quarter, and of the construction spending report for September.

Also on Wednesday will be the FOMC rate decision and the Fed is widely expected to cut rates by at least 25 basis points.

The core PCE and the manufacturing ISM and pending home sales reports for September are due on Thursday.

It??™s the first Friday of the month so all eye will be on payrolls report for October. It should be the quiet before the storm??¦

The Eurozone

The Eurozone economic agenda will open on Monday with the German CPI data for October.

Germany??™s retail sales report for September, the German unemployment for October and the retail PMI report for October for the region are due on Tuesday.

Wednesday will see the release of the French consumer confidence report for October and of the regional economic sentiment, business climate, flash HICP and industrial production for October, and the Eurozone unemployment report for September.

The Eurozone PMI report for October is due on Friday.

Japan

The Japanese economic calendar will start on Monday with the release of the unemployment and household expenditures reports for October.

The manufacturing PMI report for October is due on Tuesday.

Wednesday will see the release of the construction orders and of the housing starts reports for September.

The BoJ will leave rates unchanged on Thursday, of course.

The UK

The UK economic agenda will begin on Wednesday with the Nationwide house prices and of the Gfk confidence reports for October.

The CBI retail sales report for October and the Halifax house prices are due on Thursday.

Canada

Canada??™s Unemployment report for October is due on Friday.

Overview

Euro/dollar

Last week's range: 1.4126 ??“ 1.4395 (Up)
Previous range: 1.4144 ??“ 1.4318 (Up)

Euro/dollar rallied for the third consecutive week to reach yet a new lifetime high.

Strong resistance is seen at 1.4463. Above it, strong resistance is seen only at 1.4580. Distant resistance is at 1.4665.

Immediate support is at 1.4320. Below 1.4280, euro/dollar still has support at 1.4210. Only a break below 1.4170 would signal a more sustained decline toward the distant support at 1.4015.

NEAR-TERM:Slightly bullish
MEDIUM-TERM:Bullish
LONG-TERM: Bullish

Dollar/yen

Last week's range: 113.26 ??“ 115.03 (Mixed)
Previous range: 113.26 ??“ 114.44 (Down)

Dollar/yen closed the week unchanged after recovering from a 1 ??-month low of 113.26.

Initial support remains at 113.26. Strong support is at 112.90 from a 50-point pivot that targets 113.40 and 112.40. There is a pivot low at 111.60 which is also a 50-point pivot, which targets 112.10 and 11 1.10.

Above 114.60 there is strong resistance at 115.50 from another 50-point pivot, which targets 115.00 and 116.00. . Distant resistance now follows at 116.85 from another 50-point pivot that targets 116.35 and 117.35.

NEAR-TERM: Mixed
MEDIUM-TERM: Mixed
LONG-TERM: Bearish

Sterling/dollar

Last week's range: 2.0259 ??“ 2.0573 (Mixed)
Previous range: 2.0471 ??“ 2.0550 (Down)

Sterling/dollar encountered very choppy trading last week when it recovered from Monday??™s two week-low of 2.0259 and climbed up to a three-month high of 2.0573. Mild weakness should continue.

Initial resistance is at 2.0573. Then there is a pivotal high at 2.0654. Next level is 2.0735. Distant resistance is now perched at 2.0845.

Immediate support is seen at 2.0470. Next level is at 2.0400. Below 2.0345 there is distant support at 2.0285.

NEAR-TERM: Mixed to slightly bullish
MEDIUM-TERM:Slightly bullish
LONG-TERM:Bullish

Dollar/Swiss franc

Last week's range: 1.1602 ??“ 1.1787 (Down)
Previous range: 1.1657 ??“ 1.1858 (Down)

Dollar/Swiss closed the week lower after dipping to an over 2 ??-year low of 1.1602. The entire range was formed last Monday.

Immediate support is at 1.1600. Below 1.1585, there is support at 1.1495. Distant support follows at 1.1410.

Initial resistance is at 1.1710. Above 1.1820, distant resistance is at 1.1894.

NEAR-TERM: Mixed with downside bias
MEDIUM-TERM:Bearish
LONG-TERM: Bearish

Dollar/Canada

Last week's range: 0.9591 ??“ 0.9824 (Down)
Previous range: 0.9634 ??“ 0.9739 (Down)

Dollar/Canada fell for seven consecutive weeks and reached a 33 ?? years low. Once again, the weakness should continue at a slower pace because of the severely oversold conditions.

Below 0.9591, there is support at 0.9573. Distant support follows at 0.9450.

Initial resistance is at 0.9670. The next cap is at 0.9755. This is followed by 0.9800 and 0.9860. Distant resistance is pegged at 0.9980.

NEAR-TERM: Slightly bearish
MEDIUM-TERM: Bearish
LONG-TERM: Bearish

Euro/yen

Last week's range: 160.50 ??“ 164.56 (Mixed)
Previous range: 163.71 ??“ 167.72 (Down)

Euro/yen closed little changed after recovering from a five-week low of 160.50. The upside is favored.

Above 164.56 the euro/yen faces resistance at 164.95. The next level is 165.45. The cross then has distant resistance at 167.70.

Immediate support is seen at 163.70. This is followed by 163.25. The next level is now seen at 162.25. Distant support is at 160.50.

NEAR-TERM: Slightly bullish
MEDIUM-TERM: Slightly bullis
LONG-TERM: Bullish

Euro/sterling

Last week's range: 0.6937 ??“ 0.7018 (Up)
Previous range: 0.6948 ??“ 0.7002 (Mixed)

Euro/sterling rallied to a four-week high on Friday and posted the highest weekly close in nearly three years. Further strength is likely.

Initial resistance is at 0.7028. Above this strong pivot, resistance is still seen at 0.7045 and 0.7075. If the cross manages to close above this level, then expect a test of the distant resistance at 0.7118.

Strong support is seen at 0.6995. This is followed by 0.6950. A break below 0.6910 would signal an aggressive downmove to 0.6867. Below 0.6810, distant support comes at 0.6775.

NEAR-TERM: Mixed
MEDIUM-TERM: Slightly bullish
LONG-TERM: Bullish