The Week Ahead - Oct 10 GBP/USD - British Pound Dollar, American Session - 10/10/08 Shock and Awe for Markets All Around the World! More GBP/USD USD/CHF - Dollar Swiss Franc, American Session - 10/10/08 USD/CHF - Dollar Swiss Franc, European Session - 10/10/08 USD/CHF - Dollar Swiss Franc, American Session - 09/10/08 More USD/CHF The Week Ahead - Oct 10 USD/JPY - Dollar Yen, American Session - 10/10/08 USD/JPY Technical Analysis 10 October 2008 More USD/JPY

The Retail Sales Report came out stronger than expected. The pre-report guesses were for an increase of 0.5%. The actual report showed a 1% increase. This news kept the Dollar strong all day as it confirmed the Fed's thinking that the economy is improving enough that an interest rate hike is warranted.

Traders are also citing the fact that the G-8 meeting could provide support for the Dollar. Traders expected bullish talk and comments from the participants in the meeting. No one wants to be caught short if a bullish comment comes out of the meeting.

Additional Dollar-friendly news came from ECB Executive Board member Lorenzo Bini Smaghi who told reporters in Milan that policy makers "only sent indications for July, not beyond." His comment was similar to that of ECB executive board member Juergen Stark on June 10. Yesterday's late session Euro rally was attributed to an ECB official's comment stating that the interest rate hike in July was going to be the first of a series of hike. It looks as if there is some confusion among ECB members as to the plan of attack and how much of a hike is necessary to stem inflation.

Financial traders who bet on the direction of interest rates by committing to spread positions are already factoring in the possibility of a rate hike on August 5. The sentiment rose from 0% last week to 52%. Traders have also increased their bets that the Fed will raise rates in December from 67% to 96%.

The June Euro showed weakness on Thursday, but held a pair of main bottoms at 1.5364 and 1.5283. Based on the weak close, look for the Euro to test these lows on Friday.

If the market cannot break these bottoms, then do not be surprised by a short-covering rally.

USD/JPY Rally Continues

The USD/JPY through another resistance barrier on Thursday and is now in a position to test a major 50% level at 109.94. There may be profit taking on the first test of this level.

If the market cannot break through 108.59, then look for the start of a break. This break would be necessary to relieve the overbought condition, which has developed during this recent four-day surge. Look to buy this break, as the longer-term fundamentals are bullish.

A strong stock market could help rally this pair also as cost of carry traders would sell the Yen and buy the Dollar in order to participate in the rally.