daily analysis, mid-and long-term outlook

EURUSD

Although the recovery off the 1.4364 low posted on the Jan 22'08 has seen EUR break and close above its key resistance at the 1.4751/52 zone, its Nov 09'07/Dec 11'07 on Thursday, holding above that area is now needed to increase further strength towards its Mid- Jan'07 high at 1.4921.A turn above there will set the stage for an acceleration towards its 2007 high at 1.4967 ahead of the 1.5000 level, marking its psycho level. The daily studies remain in alignment with the above scenario as they are heading higher. On the downside, a failure to convincingly break and hold above the 1.4751/52 zone will call for lower prices towards its Jan 01'08 low/.618 Ret (1.4310-1.4921 rally) at 1.4577/45 initially and later at the 1.4446/45 zone, marking its .786 Ret/daily 100 ema followed by the 1.4310 level, its Dec 20'07 low .Further support levels are located at the 1.4278 area, its Sept 28'07 high and then the 1.4014/00 zone, its Oct 09'07 low/psycho level. On the whole, EUR continues to maintain its MT uptrend but requires a sustained invalidation of the 1.4751/52 area and the 1.4967 level to trigger that uptrend.
Support Comments 1.4577 Jan 01'08 low 1.4446/45 .786 Ret/daily 100 ema 1.4310 Dec 20'07 low 1.4278 Sept 28'07 high Resistance Comments 1.4751/52 Nov 09'07/Dec 11'07 Highs 1.4921 Jan 15'08 1.4967 2007 Peak 1.5000 Psycho Level

GBPUSD

GBP continues to strengthen its current recovery off its Jan 22'08 low at 1.9335 breaking through its solid resistance level at the 1.9653/23 area, its Aug 17'07 high/.50 Ret (1.8091-2.1160 rally)/Jun 08'07 low on Thursday and testing the top of its falling channel in early morning trading today. While another resistance stands at the 1.9879 area, its Sept 18'07 low, a breach of the mentioned channel top is required to put that level in danger of being tested. If that occurs and a successful turn above there materializes then a run at the 2.0000 level, representing its psycho level is likely. Daily RSI and Stochastics remain positive and continue to trend higher. Downside targets are seen at the 1.9753 level, its Dec 24'07 low followed by the 1.9653/23 area, which marks its Aug 17'07 high/.50 Ret (1.8091-2.1160 rally)/Jun 08'07 low ahead of the 1.9498/81 area, its weekly 100 ema/Jan 11'08 low and next the 1.9335 level, its Jan 21'08 low. All in all, the present upside recovery remains corrective of its medium term downside and the pair should head lower on completing the said correction.
Support Comments 1.9653/23 Aug 17'07 high/.50 Ret (1.8091-2.1160 rally)/Jun 08'07 low 1.9335 Jan 22'08 low 1.9498/81 Weekly 100 Ema/Jan 11'08 low 1.9271 .618 Ret Resistance Comments 1.9879 Sept 18'07 low 1.2000 Psycho Level 1.2094 Daily 200 ema

Risk Aversion Eases

Immediate demand for the Swiss franc and Japanese yen will remain lower in the short term, although further heavy selling pressure is unlikely at this stage.
The Federal Reserve interest rate cut this week, allied with the fiscal support package and hopes that a support package can be put together for the US bond insurance companies has had a significant impact in easing global risk aversion levels. Global stock markets have rallied strongly with particularly sharp gains for the German DAX index.
The latest US and European data has also not supported the case for a rapid plunge into recession conditions. The German IFO index rose slightly to 103.4 in January from 103.0 previously. US jobless claims were again lower than expected at 301,000 in the latest week from a revised 302,000 previously. Existing home sales fell by 2.2% to an annual rate of 4.89mn, although prices were little changed and inventories fell back to below 10 months supply.
The easing of fear has weakened short-term demand for the yen and Swiss franc. From highs near 105.0 against the dollar, the yen has weakened to test levels beyond 107.50 while the Euro has regained ground strongly against both currencies. Caution will prevail, but the yen and Swiss franc saw important medium-term peaks this week.

Rising Recession Risk Will See Fed Cut the Funds Rate Aggressively in 2008

The deterioration in financial markets in recent weeks has appreciably increased the risk that the U.S. economy is headed for recession with severe weakness in housing being overlaid by the higher cost of capital as equity markets came under downward pressure. The rare inter-meeting cut by the Fed on January 22, by an aggressive 75 basis points to both the Fed funds and discount rates highlights that the Fed is working hard to prevent a prolonged, deep downturn in the economy.
This move was prompted by a “weakening of the economic outlook and increasing downside risks to growth.” The Fed cited deteriorating financial market conditions, rising costs of credit, persistent housing market weakness and indications of a softening in the labour market as weights on the outlook for growth.
The December labour market report showed that the unemployment rate rose 0.3 percentage points to 5%. The softening in the labour market combined with the hit to net worth coming from weak real estate and equity markets will likely see U.S. household spending slow sharply in early 2008. At the same time, wider credit spreads and tighter lending standards are likely to dampen business spending, which in conjunction with the contraction in residential investment sets up for a much slower growth profile for most of 2008.
The bright spot will be the trade sector as the lagged impact of the U.S. dollar's depreciation keeps export growth running faster than import demand. Our assessment is that the U.S. economy will likely grow by about 1% this year teetering on the brink of recession during the first six months. The core inflation rate is expected to linger around 2% in 2008 as the impact of weaker labour markets and softening wage growth is offset by expectations that monetary stimulus will fuel price pressures in 2009.
Given this backdrop, we have revised our forecasts for interest rates. We expect the Fed to lower the funds rate to 2% with three 50 basis point rate cuts forecast at each of the next three meetings including January 29/30. Market rate forecasts have been lowered as well with the two-year U.S. Treasury rate expected to be 1.85% at the end of the first quarter and to gradually rise to 2.5% by the end of the year. This compares to our previous forecast that the two-year rate would be 2.5% at the end of the first quarter and 3.75% at year-end. We have also revised our 10-year forecast to reflect the slower economic growth and more aggressive easing to 3.4% at the end of the first quarter and 4% at year-end from 3.75% and 4.5%, respectively, in our previous projection.

Bounce from 1.4366, 22 Jan low, reached 1.4683 on 23 Jan, ahead of pullback that left a higher low at 1.4511. Fresh strength emerged from there cleared 1.4683 resistance, to reach a fresh high of 1.4779. Correction lower is underway, with positive near-term outlook, expected to leave a higher low at 1.4640 area, before fresh push higher. Lift above 1.4779 will expose 1.4820/35, possibly 1.4860.
Res: 1.4779, 1.4795, 1.4820, 1.4835
Sup: 1.4683, 1.4640, 1.4620, 1.4590

GBPUSD

Extended downtrend to reach a fresh low at 1.9336, lowest since March 2007, ahead of bounce to 1.9644 on 23 Jan. Correction lower left a higher low at 1.9464, followed by fresh strength through 1.9644/1.9792, extending to 1.9847 today, just under trendline resistance at 1.9852. Bulls are looking for test of 1.9896, 02 Jan, yearly high, while 1.9690/45 zone expected to contain dips.
Res: 1.9847, 1.9875, 1.9896, 1.9905
Sup: 1.9735, 1.9690, 1.9645, 1.9614

USDJPY

Extended downtrend from 114.65, 27 Dec high, to reach 105.00 low on 23 Jan. Recovery attempt from there reached 106.95 initially, interrupted by correction that left a higher low at 105.95, ahead of fresh strength. Break through 106.95, former high and trendline resistance, confirms base, with fresh gains extending to 107.89 today. Pullback is underway, with 106.95 expected to hold dips to maintain bullish tone for fresh attempt higher. Clearance of 107.89 to open 108.35/65 next, while potential loss of 106.95 defers.
Res: 107.89, 108.35, 108.65, 108.96
Sup: 106.95, 106.75, 106.45, 106.14

USDCHF

Declined from 1.1598, 26 Dec 2007 high, to reach 1.0837/39 lows on 16 Jan, ahead of recovery to 1.1125 on 22 Jan. Reversal from there followed, extending losses to 1.0846 on 24 Jan, to nearly fully retrace 1.0837/1.1125 upleg. Fresh rally from 1.0846 is underway, with 1.0981, nearly 50% retrace of 1.1125/1.0846 downleg, being reached.
Further upside targets 1.1019, 61.8%, while downside should be protected by 1.0933/14.
Res: 1.0987, 1.1020, 1.1040, 1.1060
Sup: 1.0933, 1.0914, 1.0870, 1.0846

USD/JPY Medium Term Outlook

The suggestion form June 2007 for a giant terminal impulse started from 101.66 (January 2005) looks the best scenario at the moment. This count is presented on the chart and suggests that the terminal impulse finished at 124.12 (June 2007). We saw a sharp sell-off from the last level and the interesting here is the fact, that the down move should accelerate from here and we should see much lower prices in coming weeks and months. The minimum requirement for the current fall is 101.66 i.e. a complete retracement of the pattern but I don’t think that there will be any significant correction before 96.50 (at this level wave 3 of the fall will be 161.8 % of wave 1 on logarithmic scale). A key resistance is 114.63 and as long as this pair stays below it, the perspectives are extremely bearish.

This Week's Market Outlook

Highlights

1. Roller coaster ride set to continue
2. All eyes on the Fed next week
3. US outlook remains weak, will drag on global growth expectations
4. Stimulus package uncertain at worst, weak at best

Roller coaster ride set to continue

You would certainly be forgiven if you're feeling a bit like Linda Blair in 'The Exorcist' after this week's market moves. I think my head has spun around at least twice in as many days and I reckon there are a few more spins ahead at the minimum. Markets are very fluid and there are a lot of important events coming up next week, but let me first try to put some of the events of this past week in context before delving into what lies ahead.
Last Friday I wrote that investors had turned outright defensive based on deteriorating global growth expectations and a sense that a US downturn was unavoidable. This week then began with an equity market meltdown that sent other riskier assets plunging as well, most notably the JPY-crosses. On Tuesday morning, the Fed unexpectedly jumped into the fray, undoubtedly based on the turmoil in financial markets (I'll get to the rogue French trader later), and cut the Fed funds rate 3/4% to 3.50%. Stocks struggled a while longer, but eventually rebounded. The rebound came on curious news that the NY state insurance regulator had convened discussions with major banks to shore up the capital of beleaguered bond insurers. The rebound in stocks and risky assets continued on Thursday as news of a US economic stimulus package emerged, only to then sputter on Friday, casting doubt on the rebound overall.
I would suggest that the balance of risks and the deteriorating outlook favor further waves of market liquidations rather than a sudden emergence into stability, much less continuing recovery. First, judging by the initial market reaction to the Fed rate cuts-further declines-it's clear to me that investor pessimism still runs deep and that lower interest rates alone will not fix the problem. Second, the ostensible cause of the impressive late afternoon rally-potential capital infusions for bond insurers-highlights ongoing credit market concerns that still lie at the root of the current market turmoil. It's highly uncertain whether a capital infusion plan can be worked out to forestall downgrades to the major bond insurers, which would result in ratings downgrades to the bonds backed by the insurers, leading to an unprecedented exodus of capital from such investments. That is the biggest fear lurking in the hearts of investors everywhere.
Third, global markets moved in tandem in what was surely one of the most volatile weeks in financial market history. I take that as further evidence that the risks emanating from the US are going to have repercussions globally and that the global investment environment remains highly unsettled. That goes back to the underlying credit market concerns, which expose investors and institutions all over the world to heightened downside risks. Finally, price action in the major stock indexes, commodities and currencies all suggest that a return to normalcy is far from nigh. Attempts by stocks to extend gains failed on Friday, generating a 'spinning top' pattern on the weekly candles, signaling indecision, while the daily candles look set to post a 'bearish engulfing' line, suggesting the rebound has already ended. Adding all these elements up, I remain convinced that further market implosions remain more likely than not and this view favors selling riskier assets (JPY-crosses, stocks, gold, and oil) on strength.
All eyes on the Fed next week

The Fed surprised markets by reacting to severe equity market declines on Monday, damaging its credibility in many respects, and throwing expectations for next week's FOMC decision into a blender. In the immediate hours following the surprise 75 bp rate cut, expectations were for a further 75 bps next week, but that was pared down to 50 bps as stocks recovered further, and fell to 25 bps as stocks peaked on Friday morning. Going into the Friday close with stocks set to close down, expectations have shifted back toward 50 bps (70%) vs. 25 bps (30%). In my mind, there also exists the very real possibility that the Fed stays on hold, having already delivered what it thinks is the 'substantive, decisive, timely' relief to the economy.
For the Fed to have cut rates just 8 days before a scheduled meeting suggests it was pushed by market developments, a position no central bank likes to be in. The meager recovery by financial markets since then clearly signals investors need more interest rate relief and that leaves the Fed in the awkward position of kowtowing to markets further or risking another financial market meltdown. Finally, the news that SocGen suffered a $7+ bio loss on unauthorized trading raised the scenario that the stock market sell-off was precipitated by the exiting of those failed positions, potentially leaving the Fed without a true rationale for the 75 bp cut. But the Fed has indicated it was unaware of the SocGen situation, the verity of which the market will debate for months to come. If policymakers feel they were duped by one-off market events, it argues for holding steady. But given the balance of risks, I'll go with a 70% chance for 25 bps and a 30% chance of steady.
Obviously the market reaction to the Fed's decision is going to be critical to the near-term trading outlook. I think it's safe to say that a steady rate decision will see a massive sell-off, a 25 bp rate cut a heavy sell-off, and a 50 bps rate cut could go either way, but most likely up on the back of financials. If the Fed cuts 50 bps and stocks don't rally, then the situation is going to get much worse before it gets better.
US outlook remains weak, will drag on global growth expectations

The US outlook remains extremely weak with analysts only debating the extent of the impending slowdown. As we saw two weeks ago, global markets are acutely sensitive to reductions in global demand and growth, especially with most major commodities still trading at or near all time highs. Gold has made another attempt to rally beyond the 914 level, but at the close of Friday, the rally looks to have been rejected soundly, and a doji pattern was generated on the daily candles. The doji and rejection from above recent highs further suggests that the rebound from $850 (which I targeted in last week's report) has already ended, leaving a double-top in its wake.
ECB officials have scoffed at the market's expectations that the ECB would cut rates in tandem with the Fed, but time is on the market's side. Eurozone growth forecasts are continuing to be downgraded as fears of a global downturn take root. European sentiment has already plunged and it's now left for that to translate into lower real consumption and slower growth. Several major European banks just this week have changed their forecasts for steady ECB rates throughout 2008 and are now expecting two rate cuts. European financial institutions and credit markets are still reeling from the US sub-prime meltdown and credit conditions remain tight as shown by ongoing ECB liquidity operations. Dwindling Eurozone growth and interest rate outlooks will continue to weigh on EUR keeping it a sell on strength.
Stimulus package uncertain at worst, weak at best

The US economic stimulus package announced late this week is already facing difficulties, as Senate leaders appear unhappy with many of the package's details and may delay its passage or alter it to a point the White House finds unacceptable. The political pressure to pass a stimulus bill will be intense, so it seems likely some compromise will be reached. But even then the logistics of distributing cash to consumers represents another hurdle that may delay payments until well into 2Q, damping the near-term outlook even further. Finally, the details of the package suggest it may not have the desired effect even if it is enacted in timely fashion. The tax rebates are primarily targeted at better-off consumers, who may not immediately spend it, blunting efforts to prop up consumption. The rest of the package is tax cuts targeted at businesses to promote investment and hiring, but given the deteriorating outlook it remains to be seen whether firms will take advantage of such tax breaks. The jury will be out on the stimulus package for quite a while and that suggests it will not provide the desired impact, keeping the near-term outlook decidedly negative.

US Market Week Wrap Up

Traders were taken for a wild ride this week as markets were roiled by a series of dramatic events, starting with steep falls in European and Asian markets on Monday (US markets were closed for the Martin Luther King holiday), and a surprise 75 bps rate cut before the open on Tuesday followed by a precipitous drop and recovery later that day. Wednesday brought revelations of the largest fraud on record, as French bank Societe Generale (GLE) admitted that a rogue trader had managed to evade oversight and lose over $7 billion. The week ended on a down note despite largely strong quarterly earnings from the tech sector, as renewed rumors about European subprime problems gave traders an excuse to take profits.
Overseas markets plummeted on Monday after President Bush failed to provide new details or reassurance on an expected economic stimulus plan. US stock futures were hit hard before Tuesday's open, but at 8:20 amET, the first emergency Fed rate cut in since 9-11 injected a modicum of confidence, allowing the US markets to close down only marginally that day.
Rumors of some form of bailout for bond insurers rallied the market midweek, as debate continued over whether these companies, which are emerging as critical pressure points in the overall subprime crisis, will survive or slide into bankruptcy. Press reports later confirmed rumors that Wilbur Ross was in discussions with Ambac for a possible takeover, and that NY State Insurance Superintendent Dianallo was tapped to lead the government's efforts to resolve the problems in the bond insurance industry.
The fraud at Societe Generale (GLE) captured headlines on Thursday morning, as the venerable French bank revealed how Jerome Kerviel hacked computer systems and lost $7 billion in a series of complex, concealed deals on European stock derivatives. There was some speculation that the fraud precipitated Monday's turbulence, as the bank's management unwound Kerviel's out-of-money trades, putting immense pressure on the futures market. There was also some speculation that the fraud precipitated the Fed's surprise rate cut, though later in the week the Fed issued a statement noting it was not yet aware of the problems at SocGen at the time of its decision.
Strong earnings from tech stocks Microsoft (MSFT), MEMC Electronic Materials (WFR), Broadcom (BRCM) and Juniper Networks (JNPR) capped off the week. MSFT's better-than-expected quarterly earnings and revenue were complimented by the company's prognosis of healthy demand from both businesses and consumers. Apple's (AAPL) quarterly report provided a less positive counterpoint to these tech wins, as Steve Jobs & Co. reported weaker iPod shipments than had been expected. The generally strong earnings reports were not enough to prevent a sell off Friday afternoon, as stock traders took profits on rumors of subprime problems emerging at Fortis and ING, and a report that Wall Street paragon Goldman Sachs would trim its workforce by 5%. For the week, the DJIA and S&P 500 ended marginally higher, the Nasdaq composite was down fractionally over the four day week.

The recent carnage in equities had the markets crying “uncle” and judging from the Federal Reserve's surprising 75bps interest rate cut earlier in the week, their pleas were heard.
In a dramatic and surprising move that reflected serious concerns about a deteriorating U.S. economy, the Federal Reserve slashed its key interest rate by three-quarters of a percentage point to 3.50% on Tuesday – a week before its January 30th meeting date. At a scheduled meeting the same day, the Bank of Canada also cut rates, but by a more measured 25bps. For the U.S. central bank this marked the biggest reduction in the federal funds rate since October 1984 and is the first such cut between meetings since September 17th, 2001. The action followed a plunge in financial markets around the world, as foreign investors expressed alarm that tightening credit in the U.S. could stifle economic growth worldwide. The Fed's decision was, thus, an attempt to address mounting signs of economic trauma and to try to restore calm to investors sentiment. The cut certainly pepped up global stock markets. With triple-digit index gains on Thursday, North American stock markets appear set for more advances at the end of this roller-coaster week. The Dow Jones industrial average closed up108.44 points yesterday, while, in Canada, the S&P/TSX composite index gained 249.87 points after dropping more than 600 points on Monday.

U.S. economy on the ropes
U.S. economic conditions have deteriorated rapidly in recent weeks. Existing home sales in the U.S. fell dramatically in December (-2.2% m/m), capping the biggest yearly slump (-12.8%) on record in more than a generation. 2007 also recorded the first ever annual decline (-2.8%) in the prices of existing single family homes in at least four decades. With home prices falling steadily and foreclosures likely to climb further amid rising mortgage rate resets, housing shows no sign of bottoming. The seemingly endless descent in the housing market is starting to seep into other sectors and, along with record high energy prices, is weighing on consumer sentiment. Credit conditions continue to tighten due to the massive debt write-downs at financial institutions. This, along with the recent steep slide in global equity markets early in the week, compounded the souring of sentiment. Employment – the last pillar of consumer support – is now giving out, with nonfarm payrolls recording the slowest growth in four years last month, lifting the unemployment rate to a two-year high of 5%. Not surprisingly, the holiday shopping season ended in a Scrooge-like fashion.
Fed rides to the rescue
Clearly, the downside risks to U.S. economic growth have increased considerably and the Fed responded with a bold 75bps inter-meeting rate cut on Tuesday.
The Fed's decision, coupled with plans underway to inject fiscal stimulus, shows a strong commitment from the U.S. authorities to try and address the current market distress and associated downside growth risks. We are hoping that the prompt and decisive actions shown by policymakers will help the U.S. avoid an all out recession. Nonetheless, the risks have definitely become acute. Indeed, U.S. real GDP is expected to advance by a mere 1.2% (annualized) in the first half of the year. Clearly, it would not take much for the downside risks to lead to back-to-back contractions in real GDP that would meet the technical definition of a recession. The Fed is well aware of this and will likely take further monetary action to ameliorate the situation. We look for an additional 75 bps in rate cuts from the Fed over the next two meetings (50 bps next week and 25 bps on March 18th), bringing the fed funds rate to 2.75%. The good news is that these hefty Fed rate cuts (175 bps so far and quite possibly 225 bps come Wednesday) should start to revive growth in the second half of 2008. The rate cuts should help lower the extent of upcoming ARM resets and directly lower mortgage costs. Lower mortgage rates, in turn, could help put a floor under home sales and ultimately help with a recovery in consumption.
Weaker times ahead for Canada
In contrast to the Fed's aggressive approach, the Bank of Canada maintained a measured approach to easing this week. The Bank cut its policy rate 25 bps to 4.00% – a move that had been widely expected. However, the deep swoon in global stock markets earlier in the week and the Fed's surprise inter-meeting rate cut, just moments before the Bank's announcement, had pumped expectations of a more aggressive 50 bps cut. Nevertheless, the Bank decided to stick to the script, reflecting their confidence in the Canadian economy's ability to weather the U.S. downturn. The slowdown stateside will, however, have obvious negative ramifications for Canada's exports to the U.S., which account for a sizeable 23% of Canadian GDP. This along with tighter credit conditions at home prompted the Bank of Canada to chop their growth and inflation outlook for 2008 in the MPR update on Thursday. The Bank now expects U.S. growth to average just 1.5% in 2008 (versus 2.1% previously), while the Canadian economy is expected to rise 1.8% this year, well below the 2.3% gain it had previously predicted.
In addition, the Bank took an ax to its inflation forecasts, reflecting the projected emergence of modest excess supply by mid-year, the inflation damping impact of the elevated loonie, and the implementation of the GST cut. Both total and core inflation are expected to fall below 1.5% by mid-year, before returning to 2 % by the end of 2009. Indeed, today's December CPI figures for Canada showed that the core CPI growth rate was already at a 1.5% y/y pace and that the 3-month annualized trend was in fact below zero, at -0.4%. This leaves the core index with a 1.6% pace during Q4, identical to the Bank's estimate from the MPR Update. This decline in inflation should continue in 2008 and will allow the Bank of Canada to push inflation concerns to the back burner as worries over further weakness in the U.S. spilling over into Canada dominate the economic dialogue. The inflation report supports the notion that the Bank has maximum flexibility to respond to growth risks over the coming months, and is one of the key reasons why we see the Bank continuing with its rate cut campaign in the first half of 2008, cutting by an additional 75bps over the next two meetings (50 bps on March 4 and 25 bps on April 22). This will bring the overnight rate to 3.25%. However, there was little in the MPR to hint that they are poised to come close to matching the very aggressive cuts seen from the Fed so far. Unlike our neighbors to the south, Canada's domestic demand platform is fundamentally sound. Indeed, November retail sales out earlier in the week doubled expectations (+0.7%, +1.7% ex-autos), consistent with still-strong consumer spending.

EURAUD

Commentary - We still favor a EURAUD deeper correction. We favor a deeper correction because wave 5 of the 1.5491-1.7159 rally was extended, and extended 5ths are often fully retraced. This is just in front of the 61.8% of 1.5491-1.7159 at 1.6128. Potential support prior to that level is the 50% at 1.6325 (11/19 low is at 1.6316). (note, W-X--Y indicates that a larger complex correction is unfolding). An alternate count suggests that larger wave 2 is complete at 1.6476. This is setting up to be one of the better trades of the year. Aggressive traders can trade from the bearish side against 1.6810 for the drop to the 1.6130/50 area.
Strategy - Getting bullish near 1.6150

EURCAD

Commentary - Last week, we wrote that "a setback is due and support should be strong in the 1.4666/1.4824 zone. This is former congestion and is defended by the 50% of 1.1462-1.5198 at 1.4678." Continue to favor a setback into the 1.4558/1.4680 zone (50%-61.8% of 1.4162-1.5198) before the next bull leg begins.
Strategy - Bullish, against 1.4477, target 1.5890 (aggressive traders can look to add to the position near mentioned support)

EURNZD

Commentary - A triangle is unfolding from the September high at 2.0056. Triangles unfold in 5 waves (a-b-c-d-e) and wave d is close to complete. Therefore, expect additional consolidation in wave e (down) before a terminal thrust higher in larger wave C completes the entire rally from the July low at 1.7029. Potential support is the 1/17 low at 1.8869. This outlook is in line with the other EUR/commodity currency pairs -- that is, expect a drop now that gives way to a big rally.
Strategy - Bullish, against 1.8510, target is above 2.1122 (July 2006 high)

EUR/USD-strategy is to buy till levels of 1.4850, failure to break this level will be a strong signal to sell the pair
Technical Oscillators that supporting the bullish tendency:
MACD after a bullish crossover, long EMA broke the zero line up
RSI tendency is bullish stands at 64.69% pointing to overbought levels
MA after a bullish cross

GBP/USD 1.9782

GBP/USD Open 1.9763 High 1.9844 Low 1.9498 Close 1.9737
First and strong resistance for the Cable today is 1.9890. Next is the top from 28 December at 1.2010, followed by 2.0110, where the 500 day crawling middle line passes. In downward direction support is expected at 1.9630, which is 37.8% correction of the climb 1.9340 - 1.9820. Next is the bottom from Wednesday 1.9480, and 1.9370, where the 100 week crawling middle line passes, which reacted on Tuesday but was not convincingly broken.
Technical resistance levels: 1.9890 1.2010 2.0110
Technical support levels: 1.9630 1.9480 1.9370
Trading range: 1.9770 - 1.9855
Trend: Upward
Buy at 1.9782 SL 1.9750 TP 1.9842
Today we made already +60 pips profit on GBP/USD from the following signal:
6:07 GMT Buy GBP/USD at 1.9776 SL 1.9750 TP 1.9836 TP reached at 7:37 GMT

Is the Fed Powerless to Stop a Recession?

On Tuesday the U.S. Federal Reserve Open Market Committee decided to lower its target for the federal funds rate by 75 basis points to 3.5 percent. Yet, despite the fact that the Federal Reserve has cut the fed funds rate by 175 basis points since September 2007, its Board of Governors agreed that “broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households.” Voting against the 75 bps rate cut was William Poole, who did not believe that current conditions justified policy action before the regularly scheduled meeting next week. Looking ahead, according to futures trading on the Fed Funds rate, traders are fully pricing an additional 25 bps rate cut and as much as 56 percent probability of a 50 bps rate cut when the Federal Reserve meets on January 30.

CREDIT MARKET: HOW IS IT DOING?

On Tuesday the U.S. Federal Reserve Open Market Committee decided to lower its target for the federal funds rate by 75 basis points to 3.5 percent. Yet, despite the fact that the Federal Reserve has cut the fed funds rate by 175 basis points since September 2007, its Board of Governors agreed that “broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households.” Voting against the 75 bps rate cut was William Poole, who did not believe that current conditions justified policy action before the regularly scheduled meeting next week. Looking ahead, according to futures trading on the Fed Funds rate, traders are fully pricing an additional 25 bps rate cut and as much as 56 percent probability of a 50 bps rate cut when the Federal Reserve meets on January 30.