Forex and Dow Jones recommended levels EUR/USD - 1.3605 Daily Market Outlook - Oct 15 Trichet call: to back the discipline on the financial markets More EUR/USD Chart of the Day - 10/15/2008 - GBP/USD GBP/USD Technical Analysis 15 October 2008 Forexpros.com Daily GBP/USD Analysis - 15.10.08 More GBP/USD Forexpros.com Daily Analysis - 15.10.08 USD/CHF - Dollar Swiss Franc, European Session - 15/10/08 USD/CHF - Dollar Swiss Franc, American Session - 14/10/08 More USD/CHF

Although the European Central Bank is not going to meet until June 5, bullish Dollar traders were reluctant to add to their positions ahead of the meeting. Traders are expecting the ECB to keep rates at 4%, but they will be closely monitoring the comments after the meeting to see if there was any dissension among the group regarding the direction of interest rates in the futures. Traders will also be looking for any change in the hawkish posture that the ECB has adopted in the year since its last rate hike in June 2007.

Citing the potential of higher inflation in the Euro Zone, the ECB has not lowered interest rates in the past year, unlike the other major economies. The ECB remains firm in its mandate to get inflation down to 2%. Although this seems like an impossibility due to the rapid global rise in food and energy prices, it seems to be happy with the results it has achieved up to this point.

Recent retail reports indicating a slowdown and a drop in consumer confidence may also be addressed in the post-meeting dialogue. The ECB has shrugged off these reports, but any indication that a trend is developing could help the Dollar rally later in the year.

Technically, the market is slightly oversold. Beginning Sunday night and continuing into the New York session, the market traded inside of a retracement zone at 1.5551 to 1.5487. Once it was clear that this area was going to hold as support, the EUR/USD rallied to confirm the May 30 minor reversal bottom at 1.5461.

Based on the current formation, do not be surprised if the market rallies back to 1.5639 1.5681 into the report on June 5.

Economic Uncertainty Drives Traders Back to Yen

Just when it looked as if the USD/JPY is poised to move higher through 106.00, the strong break may now be threatening to take out major short term support at 102.72 to 102.56 due to the fear that the U.S. economy is still on shaky ground. The Dollar bulls lightened up their positions as their appetite for Dollar-denominated assets waned following the announcement of downgrades in the banking and brokerage sector.

On Monday, the S&P Corporation, because of financial market risk exposure, lowered credit ratings at Morgan Stanley, Merrill Lynch and Lehman Brothers. More downside is expected in these stocks prompting speculation that the bottom of the credit crisis is still not in sight.

Traders sold Dollars against the Yen because of economic uncertainty. Fear sometimes drives these markets, and right now, the fear is risk exposure. Traders are nervous about holding too many Dollar-denominated assets. Because market conditions can shift quickly, traders are not willing to take a "wait-and-see attitude," but instead choose to take action on the first sign of a potential problem.

Technically, no damage was done to the USD/JPY chart as the market settled into a retracement zone at 104.29 to 103.92. The uptrend remains intact unless the bottoms at 102.72 to 102.56 are violated. If buyers step into this support zone and the fundamentals are supportive, then look for a minimum retracement back to 104.94 105.16.