Forex - Dollar continues to rise on deteriorating global economy and concern about financial markets stability

Forex News and Events: The Dollar jumped to a two-year high on Wednesday as a deteriorating global economy and concern that financial market stability is still weak make investors to liquidate risky assets. The Dollar climbed to a two-year high against the Euro and a five-year peak against Sterling on Bank of England Governor Mervyn King remarks on Tuesday that the British economy was probably entering its first recession in 16 years. King said, "Not since the beginning of the First World War had our banking system been so close to collapse. We are far from the end of the road back to stability...". These remarks heightened fears about a global recession and reminded investors that while governments globally had taken aggressive steps to shore up the financial sector it could take a while to see results. Fears of a global recession have US Investors selling their assets in both developed and emerging markets and bringing the money back home, boosting the Dollar. At the same time, major central banks, excluding the Federal Reserve, are expected to aggressively cut interest rates to shore up growth, lending the Dollar more support. EurUsd fell as low as 1.2728, its lowest since November 2006. It was last down 1.8% at 1.2774. EurJpy was 4.23% lower at 124.87. GbpUsd dropped to 1.6138, its weakest in five years. It was last down 1.94% at 1.6206. GbpJpy dropped 4.36% to 158.42. UsdChf rose 0.88% to 1.1654 posting new one-year 1.1713 high. Despite the Dollar's broad gains, UsdJpy fell 2.46% to 97.75 as the ongoing unwind in carry trades extended the Japanese currency's rally with a session low of 97.23. AudJpy fell 4.07% to 64.87 and NzdJpy dropped 5.11% to 5816. The Yen climbed to it's highest against the Euro and the Dollar, with the low-yielding Japanese currency also benefiting from the exodus from risky assets closing long-term Carry trades (strategies in which risk-taking investors borrow cheaply in low-yielding currencies such as the Yen then invest the debt in the assets of countries offering higher returns).

Today's Key Issues (time in GMT): 06:45 EUR September French Consumer spending 0.6% vs -0.3% (mom) 06:50 EUR October French Business climate 88 vs 92 07:30 SEK September PPI 0.2% vs 0.1% (mom) 07:30 SEK September PPI 3.4% vs 3.8% (yoy) 07:30 SEK Riksbank rate 3.75% vs 4.25% 08:30 GBP September Retail sales -0.9% vs 1.2% (mom) 08:30 GBP September Retail sales 2% vs 3.3% (yoy) 09:00 EUR August Euro zone Industrial new orders 0.3% vs 1% (mom) 09:00 EUR August Euro zone Industrial new orders -0.4% vs 1.6% (yoy) 12:30 EUR weekly Initial claims 470k vs 461k

The Risk Today: EurUsd Market dropped as low as 1.2728 yesterday. On the downside, further weakness will open the way down to strong support 1.2490 Trendline. Initial support holds 1.2728 yesterday low. On the upside, only a return over 1.4000 (former trendline support) and 1.5000 will release actual pressure and may put key resistance 1.6000 into focus. Resistance holds 1.4002 former trendline support. Initial resistance holds 1.3769 Tuesday high. GbpUsd Market dropped nearly 2% to 1.6206 following Tuesday break of the low triangle pattern (1.7000) which did open the way through 1.6568 November 2003 low and 61.8% retracement of 1.3682–2.1161 advances. Initial support holds 1.5471 August 2003 low. Following supports are 1.4560 trendline and 1.3682 March 2001 low. On the upside, strong resistance holds 1.7631 last weeks high ahead of 1.8304 former support. UsdJpy Downtrend started in September is still valid having hit 97.23 low yesterday and last week 103.07 rebound which marks initial resistance. On the further upside, recovery over 105 pivot point will put focus again on 108 and 110.67 15th August high. On the downside, renewed pressure may open the way to 95.75 17th March low. Current downtrend will stand below 103 upper trendline resistance. UsdChf Market posted new high 1.1713 yesterday. Further advance may open the way to 1.1895 October 2007 high and strong resistance. On the downside, only weakness below 1.0692, 22nd September low, would undermine the current uptrend and reverse down to 1.0500 and 1.0375. Such a move may look for 1.0013 15th July low in front of 0.9637 17th March low. Initial support holds 1.1246 last week low.

Resistance and Support: EURUSD GBPUSD USDJPY USDCHF 1.5000 P 1.9363 S 105.00 S 1.2153 T 1.4867 S 1.8304 M 103.07 M 1.1895 T 1.3500 P 1.7631 S 100.00 P 1.1694 M 1.2790 1.6285 97.55 1.1670 1.2728 M 1.6138 M 97.23 M 1.1246 M 1.2490 T 1.5471 S 96.85 M 1.0692 S 1.1827 T 1.4560 T 95.75 T 1.0500 K S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot