The EUR USD spent the day mostly lower as a rally failed to materialize after Tuesday's reversal bottom. Some of the weakness was attributed to a report showing Germany's economic outlook was deteriorating. The Euro gained ground when crude oil rallied, but could not hold on to the gains after an increase in crude oil inventories brought selling pressure to the oil market.

Traders are waiting for the outcome of a meeting between Freddie Mac and the Fed. The way Freddie Mac has been selling off this week, some are predicting Freddie’s problems have worsened since July 15, the last time it faced a financial crisis.

If Freddie Mac goes away through some Fed action, the Dollar is likely to break as traders will most likely take protection in the safety of the Euro out of fear that the U.S. financial system would weaken further. Strength would return to the EUR USD if traders detect a negative tone toward the U.S financial markets.

Technically, the closing price reversal bottom in the EUR USD is still intact, and also a sign that a bottom has been formed. This market needs to sustain intraday closes over 1.4793 to confirm it. The charts indicate that there is plenty of room to the upside as this type of formation often leads to a 50% or more correction of the break. This may mean a rally all the way back to 1.5335 over the near term and especially if financial conditions continue to worsen. Traders should seek 1.4699 as a pivot. The market will strong above and weak below it.

The USD JPY posted an inside day with a bias to the upside as the U.S. equity markets fought off attempts to break them. Currently, this market is resting on up-trending support and hovering on both sides of a major 50% price at 109.94. Look for weakness as long as this market stays under 109.94 and strength if a support base could be built above it. The first downside target is 108.36 if support fails. A breakout to the upside can trigger a retracement to 111.05.

The GBP USD felt early weakness as the Bank of England released its official minutes of the August meeting. The minutes indicated that the policymakers see inflation declining, but the economy worsening. Furthermore, the vote was split three ways. The majority decided to leave rates unchanged, while one member voted for a hike and another for a reduction. The GBP USD continues to hold last week's low at 1.8511 and closed slightly above a key retracement number at 1.8618. This market is grossly oversold so it may only take a trade through 1.8720 to trigger a strong short-covering rally.

The USD CHF could not follow through to the downside following Tuesday's closing price reversal top. The strong close has this market in a position to trade higher on Thursday. Problems with the U.S. financial system could encourage traders to seek the safety and security of the Swiss Franc. This market is not likely to break hard to the downside until 1.0865 is violated. Once again the direction of this pair will be dictated by the direction of the stock market. Bearish news regarding Freddie Mac or Lehman Brothers is likely to trigger a sharp break.

The USD CAD could break as higher crude oil and gold may begin to put downside pressure on this pair. Weakness in the U.S. economy or any signs that the financial crisis is widening could also encourage selling. Technical traders have been anticipating a break in the USD CAD since last week's closing price reversal top. Based on the current chart formation, this pair is vulnerable to a correction back to 1.0465.

The AUD USD is still holding above last week's closing price reversal bottom at .8591. Sharply higher Gold could trigger a massive short-covering rally in the Aussie. Watch for a rally through .8762 to trigger this breakout rally. Longer term traders should treat this rally as a selling opportunity as this market is expected to work lower over the long-term as the Reserve Bank of Australia contemplates an interest rate reduction. Aggressive short-term traders should look to be buyers at current levels as the charts indicate plenty of room to the upside.

The New Zealand Dollar continued to press the upside after last week's friendly closing price reversal bottom was confirmed. The charts indicate that the next upside target is a retracement zone at .7292 to .7403. Fundamentally, this market remains bearish due to the weakening economy and the threat of another interest rate cut before the end of the year. Counter-trend traders can wait to buy a retracement of the first leg up from the bottom or buy strength with tight stops. Stronger commodity markets and negative U.S. financial sector news will help build a case for an acceleration to the upside.

Please do not hesitate to contact us at 1-800-971-2440, with any questions.

DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. The value of currencies may fluctuate and investors may lose all or more than their original investments. Risks also include, but are not limited to, the potential for changing political and/or economic conditions that may substantially affect the price and/or liquidity of a currency. The impact of seasonal and geopolitical events is already factored into market prices. Prices in the underlying cash or physical markets do not necessarily move in tandem with futures and options prices. The leveraged nature of FX trading means that any market movement will have an equally proportional effect on your deposited funds and such may work against you as well as for you. In no event should the content of this correspondence be construed as an express or implied promise or guarantee from B.I.G. Forex, LLC and Brewer Investment Group, LLC or its subsidiaries and/or affiliates that you will profit or that losses can or will be limited in any manner whatsoever. Loss-limiting strategies such as stop loss orders may not be effective because market conditions may make it impossible to execute such orders. Likewise, strategies using combinations of positions such as "spread" or "straddle" trades may be just as risky as simple long and short positions. Past results are no indication of future performance. Information contained in this correspondence is intended for informational purposes only and was obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted.