Investors moved into the safe havens of the Dollar, Yen and Swiss franc.

The Dollar climbed to its highest since February 2007 against a basket of currencies on Tuesday as investors bet that interest rates outside the United States will fall sharply to shore up global growth. Concerns over the global economy's health moved investors away from stocks into the safe havens of the Dollar, Yen and Swiss franc. The Federal Reserve launched a new facility to provide liquidity to financial markets, which analysts said unnerved investors by highlighting continuing problems. Bank of England Governor Mervyn King said on Tuesday that Britain's economy is probably entering its first recession in 16 years. He added the British economic outlook has not worsened as rapidly as it has in the past month for a very long time. Yesterday 25bp interest-rate cut by the Bank of Canada sent the Canadian dollar tumbling to a three-year low against the Dollar.

News and Events:

The Dollar climbed to its highest since February 2007 against a basket of currencies on Tuesday as investors bet that interest rates outside the United States will fall sharply to shore up global growth.

Concerns over the global economy's health moved investors away from stocks into the safe havens of the Dollar, Yen and Swiss franc. The Federal Reserve launched a new facility to provide liquidity to financial markets, which analysts said unnerved investors by highlighting continuing problems. Analysts say aggressive interest-rate cuts by the Fed and a possible stimulus package put the US economy in a better position to recover relative to others around the world. The Federal Reserve has slashed its benchmark overnight lending rate by 375bp to 1.50%, with the last 50bp of easing coming early this month as part of a coordinated action with other major central banks. In contrast, the European Central Bank has only lowered rates by 50bp to 3.75% and that step was part of a central bank coordinated effort this month.

Bank of England Governor Mervyn King said on Tuesday that Britain's economy is probably entering its first recession in 16 years. He added the British economic outlook has not worsened as rapidly as it has in the past month for a very long time.

EurUsd dropped to 1.3002 low yesterday. It was last down 2.47% at 1.3008. EurJpy fell to its lowest since June 2005 at 130.18. It last traded at 130.38 or down 4.18%. UsdJpy fell 1.76% to 100.22 having posted 100.06 low. GbpUsd dropped 3.68% at 1.6527 after hitting 1.6513 low. GbpJpy lost 5.37% to 165.64.

Yesterday 25bp interest-rate cut by the Bank of Canada sent the Canadian dollar tumbling to a three-year low against the Dollar. UsdCad rose as high as 1.2209 before settling back at 1.2149, up 1.91%.

AudUsd fell 3.93% to 0.6747 on expectations of further policy easing from the Reserve Bank of Australia. RBA minutes from its meeting earlier this month indicated there was more room for rate cuts, though not as aggressive as this month's 100bp cut.


Today's Key Issues (time in GMT):


08:30 GBP Bank of England minutes of Interest Rate Decision
12:30 CAD September Leading Indicators 0% vs 0.2%
12:30 CAD August Retail sales ex-autos 0% vs 0.4% (mom)
12:30 CAD August Retail sales -0.2% vs 0.1% (mom)
16:00 TRY Base rate 16.75% vs 16.75%
20:00 NZD Central Bank Interest rate 6.5% vs 7.5%
23:50 JPY September Exports 5.2% vs 0.3%
23:50 JPY September Imports 24% vs 17.3%
23:50 JPY September Trade balance total 600b vs -324b

The Risk Today:

EurUsd:
Market tested 1.3002 low yesterday. On the downside, further weakness will open the way down to 1.2878 January 2007 low. Strong resistance holds 1.2490 Trendline support. Initial support holds 1.2740 this morning low. On the upside, only a return over 1.4000 (former trendline support) and 1.5000 will release actual pressure and may put key initial resistance 1.6000 into focus. Resistance holds 1.4002 former trendline support. Initial resistance holds 1.3769 Tuesday high.


GbpUsd:
Market dropped 3.68% yesterday at 1.6513. This break of the low triangle pattern (1.7000) did open the way through 1.6568 November 2003 low and 61.8% retracement of 1.3682–2.1161 advances. Initial support hold 1.5471 August 2003 low. Following supports are 1.4560 trendline and 1.3682 March 2001 low. On the upside, strong resistance holds 1.7631 last weeks high ahead of 1.8304 former support.


UsdJpy:
Downtrend started in September is still valid having hit 97.91 on Friday 10th October and last week 103.07 rebound which marks initial resistance. On the further upside, recovery over 105 pivot point will put focus again on 108 and 110.67 15th August high. On the downside, renewed pressure may open the way to 95.75 17th March low. Current downtrend will stand below 103 upper trendline resistance.


UsdChf:
Market posted new high 1.1694 this morning. Further advance may open the way to 1.1895 October 2007 high and strong resistance. On the downside, only weakness below 1.0692, 22nd September low, would undermine the current uptrend and reverse down to 1.0500 and 1.0375. Such a move may look for 1.0013 15th July low in front of 0.9637 17th March low. Initial support holds 1.1246 last week low.


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