The Week Ahead - Oct 10 EUR/USD - Euro Dollar, American Session - 10/10/08 EUR/USD - 1.3609 Daily Market Outlook - Oct 10 More EUR/USD 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

With the financial markets in Chicago indicating that the Fed is less likely to cut rates over the near term and the ECB expected to raise rates in July, the EUR/USD is once again showing signs of strength. The key to higher markets, however, will be how the market reacts to a trade back into a retracement zone at 1.5573 to 1.5637.

Thursday's initial claims and Leading Indicators report will most likely be the catalyst, but traders are going to have to make a decision if the Euro is trading inside the retracement zone. For several months the Euro has been trading inside of the 1.6019 to 1.5283 range. The recent break to 1.5302 was technically a higher-bottom which may be indicating the start of a new leg up.

In order to create a bullish scenario, strong buying has to come in to thrust this market through the upper end of the retracement zone at 1.5637. If heavy selling surfaces, then look for another down leg to begin with momentum likely to push through 1.5282 this time.

USD/JPY Falls as Traders Seek a Safe Haven

The USD/JPY could not make a new high for the week through 108.58 as traders backed off after early attempts. Weakness in the U.S. stock market due to more banking credit problems and higher crude oil prices caused traders to dump the Dollar and buy back Yen.

Chart watchers should note that the main trend is up, but overbought. Traders seeking a safe haven could drive this pair down to 106.49 105.99 before it finds strong buying. With the main trend up, look for an opportunity to buy in this zone especially at 106.39 if it stabilizes and gets support from the stock market.

Banking Problems in U.S. Weaken Dollar versus Pound

Traders took advantage of a weakening U.S. economic picture and talk of more credit issues at banks to buy the GBP/USD against the Dollar. The U.K. economy is not doing much better than the U.S., but short traders decided to lighten up positions on the bad news.

The Bank of England's Monetary Policy Committee wants growth in the economy, so it is unwilling to raise rates from current levels. Inflation reached its highest level in ten years, but Bank of England Governor Mervyn King remains "uncertain" about the direction of interest rates. These fundamentals indicate a weaker Pound over the long run, but as long as the Feds next move is also uncertain, look for the Pound to gain on the Dollar.

Buyers have been supporting the Pound in front of three major bottoms at 1.9362 (05-14-08), 1.9360 (02-2-08) and 1.9336 (01-22-08). A failure to hold 1.9336 will put this pair lower for the year, and may accelerate the market down to the March 7, 2007 bottom at 1.9181.