Forex - Risk aversion remains high in currencies after weak data and lower stock markets.

Forex News and Events: The Dollar fell against the Japanese yen on Monday, as weak US manufacturing data deepened worries about the global economy that worldwide leaders ended a weekend meeting with few concrete proposals for dealing with this year's downturn. The Euro slipped versus the Dollar in a choppy session, but was off its lows for the day, as risk aversion remained elevated on news Japan's economy slid into recession in Q3. Further weighing on the market came after record low report of Empire Manufacturing and news that Citigroup intends to slash up to 50k jobs or 15% of its work force. That depressed Wall Street, with major indexes falling more than 2%. US data showing industrial production rose 1.3% in October, after a downwardly revised September drop of 3.7%, the biggest fall in more than 62 years, did little to ease worries about the world's largest economy. The bounce in production has been attributed to a post-hurricane rebound and analysts say this was not a sign that downward pressure on the US economy was easing. In fact, the Philadelphia Federal Reserve's latest Survey of Professional Forecasters said the US economy dipped into a recession last spring and will contract sharply this quarter. Lately the Dollar rises against a broad range of currencies and the Yen gains as well when risk appetite is low because investors seek refuge in US Treasuries and unwind trades financed with the cheaply borrowed Yen. Yesterday, EurUsd was down 0.36% at 1.2644 rebounding from 1.2513 intraday low. EurJpy was 1.1% at 121.86. UsdJpy was 0.73% lower at 96.38. GbpUsd rose 1.25% at 1.4987 having posted 1.5083 intraday high. GbpJpy rose 0.51% at 144.45 with 146.50 intraday high. UsdChf rose to 1.2007 1-year high and ended 0.58% higher at 1.1988. In Washington over the weekend, leaders of the Group of 20 countries drafted steps to rescue the world economy from its worst crisis in 80 years but left it to individual governments to tailor their responses to their own circumstances and troubled industries. Traders and analysts remained skeptical on the British currency given signs of worsening UK economic conditions. The Confederation of British Industry said Monday the UK economy in 2009 will suffer its sharpest contraction in almost two decades and unemployment could approach 3 million by 2010.

Today's Key Issues (time in GMT): 09:30 GBP October CPI 0.1% vs 0.5% (mom) 09:30 GBP October CPI 4.8% vs 5.2% (yoy) 09:30 GBP October RPI 0.1% vs 0.6% (mom) 09:30 GBP October CPI 4.6% vs 5% (yoy) 13:30 USD October Producer prices -1.8% vs -0.4% (mom) 13:30 USD October Producer prices core 0.1% vs 0.4% (mom) 13:30 USD Paulson, Bernanke testify on Financial rescue 14:00 EUR ECB’s Stark holds speech in Frankfurt 14:45 GBP BoE’s Besley to make speech 17:30 EUR ECB’s Trichet holds speech in London 18:00 USD November NAHB housing market index 14 vs 14 21:45 NZD Q3 Producer prices 3% vs 5.6% 21:45 NZD Q3 Producer prices index 2% vs 3.5% 22:00 USD ABC CCI -50 vs -50

The Risk Today: EurUsd Market dropped as low as 1.2330 on October 28th and sharply rebounded to 1.3298 high Thursday last week. This shows actual trading range 1.2330 – 1.3298 drawing a triangle consolidation pattern. On the downside, renewed weakness will open the way down to trendline support 1.2208. Next long-term support holds 1.1640 November 2005 low. Further support holds 1.0739 September 2003 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 1.3298 end October high ahead of strong resistance 1.3769 14th October high. GbpUsd Market dropped as low as 1.4558 last Thursday in current 3-month downtrend dropping from late October 1.6673 high. Strong supports hold 1.4560 trendline and 1.3682 March 2001 low. On the upside, strong resistance holds 1.6673 30th October high ahead of 1.7080 (38.2% retracement of 2.1161 – 1.4558). Further resistance holds 1.7860 (50% retracement). UsdJpy Market has been holding slightly below 99.80 September-October trendline resistance in the latest weeks and drop to 94.47 last week. Initial resistance holds 97.55 Monday high. On the upside, only a recovery over 103 upper trendline and 105 pivot point will put focus again on 108 and 110.67 15th August high. Strong resistance holds 100 pivot point. Further pressure in the current downtrend might open the way down to 94.80 13th November low and then 79.70 April 1995 low. Strong support holds 90.91 24th October low. UsdChf Market hit 1.2007 new 1-year high this morning. Further strength may open the way over 1.2153 trendline resistance. Next resistance holds 1.2463. On the downside, renewed weakness below 1.1605 initial support and 1.1203 30th October low would undermine the current uptrend and reverse through 1.0692 22nd September low and 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.

Resistance and Support: EURUSD GBPUSD USDJPY USDCHF 1.5000 P 1.8860 S 103.07 T 1.2463 S 1.4002 M 1.7080 S 100.00 P 1.2153 T 1.3500 P 1.6673 S 99.48 M 1.2007 T 1.2620 1.5060 96.60 1.1985 1.2490 T 1.4659 M 92.77 M 1.1605 M 1.2308 M 1.4560 T 95.75 T 1.0692 S 1.1640 T 1.3682 T 92.00 M 1.0500 K S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot