Forex - Dollar dropped on Tuesday in volatile markets

Forex News and Events: The Dollar dropped for a third day against the Euro on Tuesday as new US measures to boost consumer lending helped ease concerns about the financial crisis, diminishing demand for the Dollar as a haven. Some investors also sold Dollars after a report showed the US economy shrank at a faster rate in the Q3 than was originally estimated, while the fall in US house prices also accelerated, suggesting the Federal Reserve may need to cut interest rates further. The U.S. dollar had been in an uptrend against major currencies in the past three months as repatriation flows and risk aversion supported the currency. Yesterday, EurUsd was up 0.85% at 1.3031, hitting three-week highs earlier at 1.3081. EurJpy rose 3.68% at 125.13. UsdJpy was down 1.43% at 95.46. GbpUsd was 1.79% higher at 1.5426 after touching 1.5534 high. UsdChf dropped 0.79% at 1.1869. The US Treasury and Federal Reserve on Tuesday announced further measures worth about $800 billion to support the debt and mortgage backed securities issued by mortgage giants Fannie Mae and Freddie Mac, as well as measures to support asset-backed consumer lending. Analysts reiterated that despite the measures, the downturn in the US economy and the crisis in the financial system are far from being over, and trading in both stocks and Dollar will remain volatile. The US economy shrank 0.5% in Q3, the Commerce Department said in its second estimate of Gross Domestic Product. It was the sharpest fall since the same period in 2001. The US decline is widely predicted to accelerate in the fourth quarter. The coming US public holiday on Thursday for Thanksgiving Day is also impacting trading.

Today's Key Issues (time in GMT): 07:00 EUR October German Import prices -3.6% vs -1% (mom) 07:00 EUR October German Import prices 2.9% vs 7.6 (yoy) 07:45 EUR November French Consumer confidence -43 vs -47 08:15 SEK November Consumer confidence -24.5 vs -24.7 08:30 EUR November Italy Business confidence 76 vs 77.7 09:00 NOK September Labor force survey 2.5% vs 2.4% 09:30 GBP Q3 GDP 2nd release -0.5% vs -0.5% (qoq) 09:30 GBP Q3 GDP 2nd release 0.3% vs 0.3% (yoy) 13:30 USD October Consumption adjusted -0.9% vs -0.3% 13:30 USD October Core PCE price index 0% vs 0.2% (mom) 13:30 USD octobre Durable goods ex-defense -1.6% vs -0.5% 13:30 USD octobre Durable goods ex-transport -1.5% vs -1% 13:30 USD October Durable goods orders -3% vs -0.9% 13:30 USD weekly Initial claims 537k vs 542k 13:30 USD October Non-defense cap good ex-aircraft -1.9% vs -1.5% 13:30 USD October Personal income 0.1% vs 0.2% 14:45 USD November Chicago PMI 36.7 vs 37.8 14:55 USD November University of Michigan conditions final 59 vs 58.4 14:55 USD November University of Michigan expectation final 55.4 vs 57 14:55 USD November University of Michigan sentiment final 57.7 vs 57.6 15:00 USD New home sales-units 450k vs 464k 16:00 EUR ECB’s Weber speaks at the Bundesbank, Berlin 21:45 NZD October merchandise trade 4.44b vs 4.35b 21:45 NZD October merchandise trade export 3.57b vs 3.17b 21:45 NZD October Trade balance month -1b vs -1.1b 21:45 NZD October Trade balance year -5.2b vs -4.9b

The Risk Today: EurUsd Market is still trading in the last 3-week trading range 1.2330 – 1.3298 but breaking up the triangle consolidation pattern. This may open the way to 1.3500 target equal to 1.3302-1.2334 spread. On the further 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. On the downside, weakness below 1.2690 may 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. 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). Yesterday volatile market hit 1.5534 high, initial resistance, before ending to 1.5426. 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 97.43 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 1.2960 M 1.6673 S 99.48 M 1.2298 M 1.2960 1.5385 95.05 1.1940 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