Overall, the currency market saw the dollar rally in the Asian session. The market had a very strong momentum tonight, which as been unseen for some time, following the very poor trading sessions from Monday when the market barely moved. The calendar holds some important releases both in the European and in the U.S. sessions, suggesting that the market will retain the strong momentum.

The Euro (Eur/Usd) tumbled tonight more than 130 pips, as investors shed the higher yielding assets. The pair already touched TheLFB S3 (1.2640) in the Asian session, the first in a long time. Also tonight, the pair broke under the 1.2750 support line, falling near the lowest value since the beginning of December.
The Pound (Gbp/Usd) fell 100 pips in the Asian session, after it bounced off the 20-day moving average. The pair is testing the TheLFB S1 (1.4185), near the low of the last day of trading. On the daily chart, the next big support line seems to be the 1.40 area.

The Aussie (Aud/Usd) managed to break free of the 20-day moving average and from the 0.6500 swing area. The pair rallied 70 pips to the downside, touching TheLFB S2 (0.6440). Among the industrialized economies, Australia is expected to be the least affected by the credit crunch, even though some forecast a negative GDP in 2009.

The following reasons were given for the RBA’s decision to lower interest rates by 100 basis points: the recent stimulus package is expected to encourage stronger demand in late 2009; interest rate reductions amount to very significant policy easing; the fiscal and monetary stimuli will take time in order to be effective.

The Cad (Usd/Cad) rose 75 pips in the Asian session. For the first time in the last few days, the cad was able to trend properly and break above the resistance area. Yesterday, the cad’s trading range was 30 pips, and closed the day posting a small gain.

The Swissy (Usd/Chf) rose almost 120 pips tonight, testing the 1.17 resistance area. This comes after the pair traded mixed in the last three days, unable to choose a direction. The 1.17 area holds the pair since the end of January.

The Yen (Usd/Yen) tested the 92.00 resistance area in the Asian session, after it topped there in the last two days of trading. The pair traded flat yesterday, posting a very small gain, but tonight it rose 50 pips, making the fifth consecutive day in which the pair heads up.

Japans Tertiary Industry Activity Index decreased 1.6 percent for December. This report comes in as expected by economists and fell for the second month in a row. This decrease is in large part due to the growing threat of a recession in Japan that has seen a lack. Japan, which is the world’s second largest economy, has shrunk at the fastest pace since 1974.