Forex - Investors remain cautious despite Citigroup rescue.

Forex News and Events: The Dollar soared against the Yen on Friday, buoyed by Wall Street's surge, while US Treasuries added to earlier losses, following reports New York Federal Reserve Bank President Timothy Geithner has been tapped as the new Treasury secretary. The market welcomed the reports, which were not confirmed by the transition office of President-elect Barack Obama. Geithner, a career Treasury official under both Robert Rubin and Lawrence Summers, has been instrumental in helping US Treasury Secretary Henry Paulson and his team address in the global financial crisis. He was also instrumental in brokering the JPMorgan Chase acquisition of Bear Stearns. On Friday, UsdJpy rose 2.03% to 95.97, while EurJpy climbed 3.15% to 120.69. EurUsd gained 1.11% to 1.2577. GbpUsd was up 0.88% at 1.4868 after posting 1.5062 intraday high. GbpJpy rose 2.92% to 142.67. UsdChf dropped 0.32% at 1.2218 after hitting 1.2298 17-month high. Financial markets have been quiet for most of the Friday session, with stocks generally trading with a positive tone amid reports banking giant Citigroup was considering a merger. Stock market gains prompted those who had lately sold risky assets in favor of the US and Japanese currencies to reverse course and move lightly back into equities, commodities, and higher-yielding currencies such as the Euro and Sterling. However, analysts warned that investor worry remains strong. Trading activity was more subdued than usual at Monday opening, with Japanese financial markets closed for a national holiday. And the Yen pushed higher this morning as investors cut higher-yielding currencies, with a US government rescue for embattled bank Citigroup doing little to revive appetite for risky positions. Analysts said the Citigroup deal with the government should help relieve some of the anxiety surrounding the financial giant that has battered stock markets and drove the SP500 index to an 11-year low last week. Citigroup will receive $27 billion of capital and the government will provide a guarantee for $306 billion of assets, with Citi still on the hook for at least the first $29 billion of losses. But any relief was expected to be short-lived as investors come to grips with the depths of an expected global recession next year and the damage inflicted by the 15-month financial crisis. Market players are also still worried about the fate of the top US automakers, which left Washington empty handed following last week's plea for bailout funds.

Today's Key Issues (time in GMT): 00:00 JPY Market Holiday 09:00 EUR November German Ifo business climate 85.8 vs 90.2 09:00 EUR November German Ifo current conditions 94.8 vs 99.9 09:00 EUR November German Ifo expectations 77.6 vs 81.4 09:00 EUR September Euro zone Industrial new orders -3% vs -1.2% (mom) 09:00 EUR September Euro zone Industrial new orders -1.9% vs -6.6% (yoy) 14:00 EUR November Belgium Leading indicator -17.5 vs -14.8 15:00 USD October Existing home sale-units 5.00m vs 5.18m 15:30 GBP Chancellor Darling presents his second pre-budget report

The Risk Today: EurUsd Market is still trading in the last 3-week 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. GbpUsd Market dropped as low as 1.4558 on November 13th 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). Last week volatile market hit 1.5250 high before reversing to 1.4704. UsdJpy Market has been holding slightly below 99.80 September-October trendline resistance in the latest weeks and even dropping to 93.56 low last week. Initial resistance holds 97.55 last 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. Meanwhile, 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 1.2298 high on Friday. Further strength may look for 1.2463 strong resistance ahead of 1.2506 (61.8% retracement of 1.4278 – 0.9639 decline). 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 S 1.8860 S 103.07 T 1.2506 S 1.3500 P 1.7080 S 100.00 P 1.2470 T 1.2814 M 1.6673 S 99.48 M 1.2298 M 1.2585 1.4905 95.25 1.2215 1.2490 T 1.4558 T 94.80 M 1.1605 M 1.2308 M 1.4042 S 92.77 S 1.0692 S 1.1640 T 1.3682 T 90.91 S 1.0500 K S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot