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EUR/USD Technical Analysis 24 July 2008 The dollar ups after oil recovery Market Moving News: EUR/USD - Jul 24 More EUR/USD Market Moving News: GBP/USD - Jul 24 GBP/USD Fundamental Outlook at 1500 GMT (EST + 0500) GBP/USD Elliott Wave daily analysis - July 23 More GBP/USD Chart of the Day - 7/23/2008 - USD/CHF USD/CHF - Dollar Swiss Franc, American Session - 23/07/08 USD/CHF - Dollar Swiss Franc, European Session - 23/07/08 More USD/CHF

The AUD was strong against the U.S. Dollar as traders anticipated another interest rate hike. The RBA is expected to raise rates by ¼% to 7% on Tuesday, Feb. 5 (2:30EST). Australian rates are nearly the highest among the major currencies. While key central banks have been aggressively cutting rates, the RBA has been steadily raising rates. This action has boosted the Australian currency against the U.S. attracting both hedge fund and speculative traders. Late Monday talk circulated of a possible 50 basis point increase. This kind of chatter reminds us that America's economic problems have not stopped the growth in other parts of the world. Watch the tone of the commentary as some economists feel that this could be last of the hikes.

Later in the week on Thursday, Feb. 7, the Bank of England (BoE) and the European Central Bank (ECB) are both set to make interest rate announcements. The BoE is expected to cut rates by ¼% to 5.25%. Slowing in retail and manufacturing sectors are prompting this anticipated cut although talk circulated that BoE may decline to soften rates over impending inflation concerns. The ECB is expected to hold rates steady even in the face of softening growth. The market is expecting growth rates to diminish throughout the year as the U.S. economy teeters on the brink of a recession.

The inability of the EUR to make new highs against the U.S. Dollar could be a sign that traders are going to allow monetary policy to work the U.S. economy out of its troubles. The recent aggressive rates cuts by the FED have placed U.S. Dollar bears on the sidelines as traders take a "look and see" attitude toward the economy. The action by the FED is a definite sign that they are more focused on the economy rather than the Dollar. However, the Dollar has not been sold with much vigor as it was in the fall when the credit situation and economic uncertainty weighed heavily on the U.S. economy. Aggressive players will watch more cautiously later in the month, as the more important economic reports are unveiled. Any sign of weakness or failure of monetary policy is likely to trigger the start of another leg higher in the EUR.

Aggressive USDJPY and USDCHF traders took on risk early in the session coming off firm Asian stock markets. Traders in these two pairs flipped to the short side as the U.S. stock market could not hold overnight gains. Intraday chatter surfaced regarding a possible rate cut by the BOJ to stem recent buying in the JPY.

Early in New York, economic data showed the lowest level of orders placed with American factories since 2002. Although December orders rose 2.3%, total orders placed in 2007 with U.S. factories rose by just 1.4%. This was the indicator's worst performance since 2002.

This week's U.S. reports include January ISM Services (2/5, 10:00 EST), Fourth Quarter Preliminary Productivity (2/6, 8:30 EST), December Pending Home Sales (2/7, 10:00 EST), December Consumer Credit (2/7, 15:00 EST) and December Wholesale Inventories (2/8, 10:00 EST). .

Technical Analysis

EUR/USD – The EURUSD did not confirm the daily reversal down with a follow through break today. This is an indication that players would rather sell against some high or retracement rather than on weakness. This is typical action in a long- term bull market as counter-trend traders do not appear to be very aggressive. Follow through selling is still needed to confirm the reversal top. A move through 1.478 would confirm the short term top and could trigger a minimum 50% correction of the 1.436 – 1.495 range to 1.465. Expectations are for fresh buyers to step in on the test of 1.465. If 1.479 holds as the near term low, then watch for a rally back to 1.487. Counter trend traders could become aggressive sellers at this price. With the reversal top still in tact, the markets look bearish over the short term. Once again, aggressive selling with conviction through 1.478 is needed.

USD/JPY – This pair remains in a tight range as traders assess the near term resistance at 107.88. As mentioned several times over the past few days, this market is poised for a large volatility move, as traders have kept it inside of a tight range. The key to any expansion of the range is whether traders can take out 107.88. A move through this price turns the trend to up and is likely to trigger some strong short covering. Bullish traders regained a major retracement area at 106.42 – 106.08. This area must attract new buyers on all re-tests to give the pattern time to develop. The developing bullish pattern fails, however, if 105.70 is penetrated. The action in two out of the last three days shows the importance of this support.

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