Forex market believe the worst of the problems in the US financial system are not yet over

The Dollar fell near a record low against the Euro as investors believe the worst of the problems in the US financial system are not yet over. While the Dollar has recovered somewhat after better results than expected from big financial institutions such as Citigroup, JPMorgan Chase and Bank of America, investors are awaiting more earnings reports this week. With the economy suffering as the credit crisis hits the housing market and banks, expectations for the Federal Reserve to raise interest rates before the end of the year to curb inflation pressures are fading quickly, hurting the dollar. The market's focus remains on a rescue plan for troubled US mortgage finance giants Fannie Mae and Freddie Mac. On Monday, US Treasury Secretary Henry Paulson said in an interview with CNBC that confidence in US capital markets and the US economy was the most important thing to support a strong Dollar. The Euro may gain against the Yen as Japanese Investors ship more funds into higher-yielding currencies for better returns, with traders watching whether the single currency tops Monday's record high and reaches the 169.92 level.
News and Events:


The Dollar fell near a record low against the Euro as investors believe the worst of the problems in the US financial system are not yet over. While the Dollar has recovered somewhat after better results than expected from big financial institutions such as Citigroup, JPMorgan Chase and Bank of America, investors are awaiting more earnings reports this week.

The Euro may gain against the Yen as Japanese Investors ship more funds into higher-yielding currencies for better returns, with traders watching whether the single currency tops Monday's record high and reaches the 169.92 level. Traders cited Japanese exporter selling UsdJpy between 106.50 and 106.80, while near-term support was seen around 106.10 yen.

EurUsd rose 0.44% to 1.5914. UsdJpy was 0.37% lower at 106.55. UsdChf dropped 0.42% to 1.0181. GbpUsd rose 0.37% at 2.0016.

With no major data or events scheduled, major currencies are likely to stay confined to narrow ranges as many market players kept to the sidelines, traders and analysts said. With the economy suffering as the credit crisis hits the housing market and banks, expectations for the Federal Reserve to raise interest rates before the end of the year to curb inflation pressures are fading quickly, hurting the dollar. Compared with the Fed's 2% policy target, the European Central Bank's 4.25% rate keeps the Euro attractive.

The market's focus remains on a rescue plan for troubled U.S. mortgage finance giants Fannie Mae and Freddie Mac. US Treasury Secretary Henry Paulson said on Sunday he was optimistic that Congress would approve the government's request for authority to shore them up. On Monday, Paulson said in an interview with CNBC that confidence in US capital markets and the US economy was the most important thing to support a strong Dollar. He will speak later in the day.





Today's Key Issues (time in GMT):


06:15 CHF June Trade Chf 2.4B vs Chf 1.8B
08:45 GBP Bank of England’s King, Gieve, Jenkinson and Bailey testify at Treasury Select Committee
12:10 USD Treasury’s Paulson speaks on the economy, New York
12:30 CAD May Retail Sales ex-autos 0.8% vs 1.1% (MoM)
12:30 CAD May Retail Sales 0.6% vs 0.6% (MoM)
12:30 USD Fed’s Plosser speaks on the economy, Pennsylvania
14:00 USD May House Price Index -0.4% vs -0.8% (MoM)
23:00 USD weekly ABC CCI -42 vs -41
The Risk Today:

EurUsd:
Market hit 1.6039 high last week. This marks initial resistance over 1.6000 Pivot point resistance. A break there would open the way to key resistance 1.6200. On the downtrend, return below 1.5800 will undermine the recent uptrend. Any weakness may bring back 1.5400 – 1.5800 consolidation range. Below, strong support holds 1.5304 13th June low.


GbpUsd:
Cable is set in short term 1.9900 – 2.0100 trading range. It hit 2.0158 high last week. Key level holds again 2.0100. On the downside, only a return below 1.9649 might bring again focus on 1.9337 January low and 1.9105 (50% retracement of 1.7049 – 2.1162 advance). Initial support holds 1.9649 July 7th low. Strong support holds 1.9363 20th February and 14th May low.


UsdJpy:
Last week profit taking had push the market over 105 pivot point. Friday strong Dollar rebound put focus on mid-June 108.59 resistance and 110.10 strong resistance (Trendline). Further advance would open the way toward 111.92 early January high. On the downside, a return below 105 may open the way toward 102.73 support and 100 pivot point.


UsdChf:
Market hit 1.0013 last week. Further weakness below 1.0000 may open the way toward 0.9637 17th March low. Renewed strength over 1.0200 would reopen the 1.0200 – 1.0600 consolidation range. Initial resistance holds 1.0353 9th July high.



Resistance and Support:



By
Jean-Claude Braha
- ACM Advanced Currency Markets, Geneva, Switzerland
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Provided by ACM: http://www.ac-markets.com