Economic News
 
USD
 
We begin this trading week with tremendous speculation over how the greenback will perform ahead of Tuesday's interest rate statement. Last week, the dollar bounced back against the Euro due to surprising figures from ADP and Non-Farm data. Combined with the surprise cut in UK interest rates the dollar strengthened against its major counterparts, before re-adjusting itself back to levels of above 1.46 against the Euro prior the close of trading on Friday.

Most indications are that the Federal Reserve will once again cut interest rates by a quarter of a percent from 4.50% to 4.25%, making it twice in the last two months that the Fed has had to step in to control the dwindling dollar. The interest statement, set to be released on Tuesday, December 11th at 13:30 GMT is one of many pertinent economic news events on schedule this week. The US will see the release of discount rates, Import Price Indices, Retails Sales, Core Retails Sales, PPI, Core CPI, and Industrial Production numbers. The aforementioned news will be overshadowed of course by the Trade Balance numbers on Wednesday and the Interest Rate statement on Tuesday. On tap for today's economic calendar are the monthly Pending Home Sales numbers. The figures are expected to be down a bit over 1 percentage point from 0.2% to -1.0%. It should be said however that last week's forecasts were way off, so we should wait and see.

This should be an important week for the greenback as it will have to react strongly to rates cuts in order to set a corrective trend as we grow even closer to 2008. One should be wary of how the Dow Jones performs as well this week to gage how much confidence is still behind the greenback.  

EUR

The European community was hit with quite a stunner, as the British unexpectedly cut interest rates to spark even further gains to the dollar in the early part of last week. What had already been a slow week for the Euro, turned into quite a scare, as the dollar exhibited some of its old school dominance in the marketplace. The Euro, which had been above levels of 1.47 quickly dropped to under 1.46, before correcting itself by week's end.

ECB President Trichet noted at a press conference shortly after EU interest rate statements, that there was talk of an interest rate hike at ECB meetings, but that "The reappraisal of risks in financial markets is still evolving and is accompanied by continued uncertainty about the potential impact on the real economy, and that is the reason why we consider that it is not opportune to decide today (to hike rates)".

The EU Economic calendar is reserved with several indicators of little to no significance. Of the 15 or so events due up, only the ECB Monthly Bulletin and German ZEW Sentiment are of any real consequence. The fate of the 13-nation currency will rest heavily on trader response to US interest cuts and the invigorating progress coming from the Dow.  

JPY

The Japanese Yen has watched along as the Dow Jones has begun to recover some ground, thus forcing the inevitable drop in carry trading. The Yen's lucrative position on carry trades has left it dependent on outside factors, with the most pertinent information being that from the US. Last week, the USD/JPY rose steadily as investors foresaw the Dow movement and began to abandon high yielding assets. The currency pair jumped from 109 support levels to over 111 as early morning trade in the Far East began.

The economic calendar for Japan this week stays somewhat dull as the only real highlight should be that of the Tankan Large Manufacturers Index. The index measures the general business conditions of large manufacturers and is important to be noted that traders pay special attention to the Tankan survey because it's one of the few growth indicators produced directly by the BoJ. It looks as if the JPY will continue to float on a moderate bearish notion, at least until the end of this trading week. 

Technical News
 
EUR/USD

A bearish channel is establishing On the 4 Hour chart that might take the pair to the 1.4500 - 1.4560 levels. The first target price is located at 1.4615 (Fibonacci 38.2%) and the second target price located at 1.4579 (Fibonacci 23.6%). If the 1.4660 level will not be breached, then going short looks like a preferable strategy for today.  

GBP/USD

On the 4 Hour chart a falling wedge structure is establishing and in case of a completion, we might see the pair relocated at 2.0100. The Slow Stochastic has crossed the 82 level and momentum has a negative slope that supports the upcoming bearish trend. It looks as if the bearish trend might continue for the short run.  

USD/JPY

The pair's massive correction from the 107.00 level continues, as we now see the second bearish cross on the daily slow stochastic. Together with the Doji formation there is a great possibility of a local bearish move that might take the pair back to the 110.50 level.  

USD/CHF

The pair's movement is quite moderate and characterized by relatively low liquidity, with a slight bullish move. Indicators on the 4 hour level shows mixed signals, as the daily studies are still a bit bullish. Waiting for a clear signal on the hourly level before entering the market might be wise.  

Forex Trading
The Wild Card
 
Crude Oil

The bearish trend continues at full steam, as all oscillators show that there is still more room to run probably into the 86.00 levels on the next local move. This is a great opportunity for forex traders to use the strong bearish momentum and take profits on the short run.