U.S. stock indices shrugged off more depressing home sales news on Thursday, which showed 2007 as the worst year in forty for U.S. home sales and prices. This also lent support to a carry trade rally which kicked off mid-morning GMT. EURJPY ended the day up approximately 200 pips as shorts continued to liquidate their positions following Tuesday's bottom and Wednesday's re-test. This pair gave us a steady rally once an hourly close above Tuesday's high was accomplished, which completed a powerful W formation on the 60 and 240-minute charts. Despite today’s rally the short-term trend on the daily chart is still lower with the possibility of a test of 160, which is where the pair broke down from.

USDJPY gave us a rally also, as the Yen weakened with short and intermediate-term traders liquidating long positions as the 106.00 level in USDJPY held through the London session. Similar to EURJPY, this pair has a bit of room above while still maintaining its current short-term bearish stance on the daily chart. Fridays tend toward counter-trend moves so we may be in for sideways to higher action tomorrow.

EUR jumped higher following a better than expected German IFO reading (Business Climate Index) and continued persistence on behalf of ECB deputies that inflation is still a concern. Most traders felt that while the ECB will likely cut, it won’t be nearly has fast as the Americans have, nor as much as their own business leaders are hoping for. GBP jumped higher in sympathy with the Euro and went on to double its London session gains during the U.S. session.

Both the Aussie and New Zealand strengthened against the greenback throughout the Tokyo and London sessions in unison with the carry trades and European currencies.

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