Forex - BoE lowered benchmark to 3% while ECB cut by a disappointing 50bp and SNB surprised with a 50bp cut.

Forex News and Events: The Euro fell broadly on Thursday after the European Central Bank cut interest rates by 50bp, disappointing investors waiting for a more aggressive move. The ECB's decision to reduce borrowing costs to 3.25% was a relatively small step compared to the Bank of England's surprise decision to slash UK rates by 150bp to 3% their lowest in more than 50 years. While usually rate cuts weaken a currency's demand, analysts said fear of a prolonged recession means investors are rewarding proactive central banks for efforts to boost growth. Sterling initially rose on the BoE news and the Euro came off session lows when ECB President Jean-Claude Trichet said he did not exclude further rate cuts, though investors said the ECB still looks dangerously behind the curve. Markets had expected the BoE to reduce rates to boost a weakening British economy, but the most aggressive speculation was for 100bp cut. The Swiss National Bank also surprised investors with an unscheduled 50bp rate cut, lowering them to 1.75%. Yen rose against majors powered by risk-averse investors continuing to exit trades of higher-yielding assets financed with the Japanese currency. That unwinding continued to weigh on US stocks, with the Dow falling sharply for a second straight day, as investors worried about the outlook for the global economy. The International Monetary Fund said Thursday that developed countries' economies would contract next year for the first time since World War II. Yesterday, EurUsd was down 1.73% at 1.2690. EurJpy lost 2.69% at 123.44. GbpUsd dropped 1.68% to 1.5577. GbpJpy was 2.61% lower at 151.55.UsdChf rose 1.53% to 1.1779. UsdJpy fell 0.96% to 97.28. Investors expect data on Friday to show US employers slashed jobs for a 10th straight month in October. The consensus estimate of economists is for US nonfarm payrolls to plunge 200k after falling 159k in September. A worsening US economic outlook and a growing credit crisis prompted the Federal Reserve to start cutting its benchmark interest rate in late 2007 and last week it took it down to 1%. The ECB has moved more slowly and even raised rates in July before delivering two 50bp cuts in recent weeks to bring borrowing costs down to 3.25%.

Today's Key Issues (time in GMT): 06:45 CHF October Unemployment Rate adj. 2.6% vs 2.6% 07:00 EUR September German Exports 0.7% vs -0.5% (mom) 07:00 EUR September German Imports 0.9% vs -2.5% (mom) 07:00 EUR September German Trade Balance € 13.7b vs € 13.1b 07:45 EUR September French Trade Balance € -6.25b vs €5.379b 11:00 EUR September German -2% vs 3.4% (mom) 12:00 CAD October Unemployment 6.2% vs 6.1% 13:30 USD October manufacturing payroll -61k vs -51k 13:30 USD October Non-manufacturing payroll -200k vs -159k 13:30 USD October Unemployment 6.3% vs 6.1% 15:00 USD September Wholesale inventories 0.3% vs 0.8% 16:30 USD September Pending sales change -3% vs 7.4% 20:00 USD September Consumer credit $-0.4b vs $-7.9b

The Risk Today: EurUsd Market dropped as low as 1.2330 last week and sharply rebounded to 1.3298 high Thursday last week. This shows actual trading range 1.2330 – 1.3298. 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 1.3769 14th October high. GbpUsd Market hit 1.5265 low on 24th October and then recovered up to 1.6673 high last week. This holds trading range 1.5265 – 1.6673. Strong support holds 1.5279 Monday 24th October low. Deep following supports are 1.4560 trendline and 1.3682 March 2001 low. On the upside, strong resistance holds 1.6673 last weeks high ahead of 1.7144 (38.2% retracement of 2.0158 – 1.5265 3-month drop). Further resistance holds 1.7744 (50% retracement). UsdJpy Market has now recovered up to 99.80 September-October trendline resistance following two weeks ago drop to 90.91 on Friday 24th October. 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. Initial resistance holds 99.80 ahead of 100 pivot point. Staying in the current downtrend might open the way down to 79.70 April 1995 low. UsdChf Market recovered Tuesday to 1.1802 high from Friday 1.1203 low. Further advance may open the way to 1.1895 October 2007 high and strong resistance. Strong resistance holds 1.1780. On the downside, renewed weakness below 1.1203 Friday 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 1.9363 S 103.07 T 1.1895 T 1.4002 M 1.8304 M 100.00 P 1.1802 M 1.3500 P 1.7631 S 99.80 M 1.1780 S 1.2800 1.5680 97.45 1.1725 1.2530 M 1.5279 M 92.77 M 1.1246 M 1.2490 T 1.5265 S 95.75 T 1.0692 S 1.1640 T 1.4560 T 92.00 M 1.0500 K S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot