US government seized control of mortgage companies Fannie May and Freddie Mac this weekend.

By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland

News and Events:

The Dollar fell against the Euro but climbed on a sliding Yen on Monday after the US government seized control of mortgage companies Fannie Mae and Freddie Mac to shore up the US housing market and protect against more global financial turbulence. The takeover on Sunday of the two mortgage giants, which own or guarantee half of the country's $12 trillion in outstanding home mortgage debt, followed growing concern about the mounting losses at both of them, undermining them as other sources of house lending have dried up. Still, the impact of the rescue package on the US economy may be limited and the outlook for the Dollar is unclear after data on Friday showed a jump in the unemployment rate as the economy lost jobs for the eight month in a row, analysts said. US Treasury Secretary Henry Paulson said at a news conference that Fannie Mae and Freddie Mac were so large that "a failure of either of them would cause great turmoil in our financial markets here at home and around the globe". A large proportion of their bonds are held by many investors around the world, especially central banks in Asia. Japanese Finance Minister Bunmei Ibuki said on Monday the US move would be positive for the global economy. Ibuki also said Paulson would explain the mortgage lenders rescue package to the G7 finance ministers later Monday. EurUsd rose as high as 1.4430 this morning. EurJpy jumped to 157 high from Friday 153.71 last. GbpJpy also jumped higher to 195.68 high from last week 190.24 close. UsdJpy climbed as high as 109.04. Audjpy jumped more than 3% at 90.82 high, sharply above a 2-year low of 85.04 hit last Friday. The high yielding New Zealand and Australian currencies recouped some of their recent sharp losses as risk aversion calmed a little. NzdUsd jumped more than 2% to 0.6830 high and AudUsd gained about 1.9% to 0.8327 high.

Today's Key Issues (time in GMT):

05:45 CHF August Unemployment Rate Adj. 2.5% vs 2.5%
05:45 CHF August Unemployment Rate unadj. 2.4% vs 2.3%
08:30 EUR September Sentix index -18.4 vs -15.3
08:30 GBP August PPI Core output 0.3% vs 0.3% (mom)
08:30 GBP August PPI Core output 6.5% vs 6.6% (yoy)
08:30 GBP August PPI Input prices -1.2% vs -0.6% (mom)
08:30 GBP August PPI Input prices 29% vs 30.1% (yoy)
08:30 GBP August PPI Input prices NSA 0% vs 0.4% (mom)
08:30 GBP August PPI Input prices NSA 10.2% vs 10.2% (yoy)
12:30 CAD July Building permits -2% vs -5.3%
14:00 USD August Employment Index 112.1
19:00 USD July Consumer credit $8.4b vs $14.3b

The Risk Today:

EurUsd Market dropped as low as 1.4197 last week. Further weakness will put the focus on strong support 1.4126 22nd October low. On the upside, only a return over 1.5000 and 1.5500 will release actual pressure and put key initial resistance 1.6000 into focus. Still a break up there would open the way to Trendline resistance 1.6200.

GbpUsd Cable dropped to 1.7537 low on Friday. Last week sharp move broke 1.7936 19th April support. Strong support holds 1.7251 3rd April low. On the upside, initial resistance holds 1.8795 last 3-weeks high. Former support 1.9363 holds also strong resistance. Key level holds 2.0100 resistance.

UsdJpy Market tested last week the 6-month lower trend line support at 106.50. It posted 105.53 low on Friday. Further pressure may open the way toward 105 pivot (38.2% retracement of 95.75 – 110.67 advance), as well as 102.73 support and 100 pivot point. Initial support holds 105 strong support.

UsdChf Market rose as high as 1.1191 last week. Strong resistance holds 1.1593 December 2007 high. On the downside, initial support holds 1.0863. Only renewed weakness below 1.0500 and 1.0375 would retest the 1.0000 pivot point and may open the way toward 0.9637 17th March low.

Resistance and Support:

EURUSD	GBPUSD	USDJPY	USDCHF
1.6000 K	2.0100 K	111.92 K	1.2153 T
1.5500 P	1.9363 S	110.67 M	1.1411 S
1.5000 S	1.8723 M	109.18 M	1.1191 K
1.4425	1.7955	108.70	1.1145
1.4221 M	1.7563 M	105.70 M	1.0863 S
1.4213 M	1.7500 S	105.00 P	1.0500 K
1.4126 S	1.7251 S	102.73 S	1.0000 P
S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot

Daily economic events and commentary

US government seized control of mortgage companies Fannie May and Freddie Mac this weekend.