Forex - Traders expect thin trading but higher volatility over Thanksgiving Holiday

Forex News and Events: The Dollar rose against the Euro on Wednesday as few weak US economic reports renewed worries of a deepening economic recession, leading investors to buy the Dollar as a safe haven. Dollar gains versus the Euro recently have been linked to repatriation of funds and extreme risk aversion instead of economic fundamentals. The Dollar demand for safety increased on Wednesday as US economic data showed a much larger drop in Durable Goods Orders last month and weak readings on New-Home sales, Business activity in the Midwest and weekly Jobless Claims. US durable goods orders were much lower in October and Chicago PMI dropped to the lowest level since the severe 1982 recession. In addition, sales of newly built US homes dropped sharply in October near levels last 17 years ago. Demand for the euro also fell as investors were pessimistic about whether a European stimulus package will be sufficient to ease the financial crisis. The currency hit a session low versus the dollar after the European Central Bank said falling price pressures in the Euro-zone have left "ample room" to move on interest rates. The European plan follows the announcement on Tuesday of an $800 billion US plan to rescue its debt securities markets. Yesterday, EurUsd was 1.04% lower at $1.2895. UsdChf gained 1.31% to 1.2078. GbpUsd slipped 0.61% to 1.5332. UsdJpy was 0.19% up to 95.64. EurJpy was 0.86% lower at 123.33. GbpJpy was 0.42% lower to 146.63. Currency traders said they expect thin trading after the US Thanksgiving Holiday on Thursday to exacerbate volatility in the currency markets on Friday. The Japanese currency was pressured after China surprised markets with a 108bp rate cut, its largest since 1997. The Yen is often used as a proxy for the Chinese Yuan, which trades in a tight band against the Dollar.

Today's Key Issues (time in GMT): 00:00 USD Thanksgiving holiday in US, market close early 07:00 GBP November Nationwide House Price -0.4% vs -1.4% (mom) 07:00 GBP November Nationwide House Price -13.9% vs -14.6% (yoy) 09:00 EUR November German Unemployment rate 7.5% vs 7.5% 09:00 EUR October Euro-zone Money Private loans 8% vs 8.5% 09:00 EUR October Euro-zone Money-M3 annual growth 8.1% vs 8.6% 09:00 NOK November Unemployment 1.7% vs 1.7% 10:00 EUR Euro-zone Business climate -1.5 vs -1.34 10:00 EUR Euro-zone Consumer sentiment -25 vs -24 10:00 EUR Euro-zone Economic sentiment 78.6 vs 80.4 10:00 EUR Euro-zone Industrial sentiment -21 vs -18 10:00 EUR Euro-zone Services sentiment -8 vs -6 15:30 EUR ECB’s Trichet speaks at Mediterranean central bankers meeting 16:00 CHF Swiss National Bank president Roth speaks, Berne

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). Tuesday 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 1.7080 S 103.07 T 1.2506 S 1.3500 P 1.6673 S 100.00 P 1.2470 T 1.2960 M 1.5534 M 99.48 M 1.2298 M 1.2915 1.5400 95.15 1.1985 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