Forex - Christmas trading is here, markets consolidate and settle into tight ranges.

Forex News and Events: The dollar regains it’s winning ways this morning as last week’s encouraging White house intervention regarding Chrysler and GM stimulates markets. We have however seen volumes and activity slowly wind down as the world prepares to celebrate Christmas and the Christian New Year. While this “breather” is very much noticeable for the equities and Currency markets – recent developments in the U.S have allowed the green back to somewhat “bounce back” from the retracement of the past two weeks. The stabilization that the $17.4Bn Auto rescue plan brought to the markets has eliminated a short-term event risk going into 2009 – where more challenges await the global economy. The EURUSD traded a tight 1.3950 – 1.4040 range in early Asian trading before hitting larger volumes at European Open. These more subdued moves come after a week of record price action as the dollar slid against all currency pairs – dropping a massive 16.6% since the 5th of December. The USDJPY reacted most to the announcement of the Auto bailout in the U.S, turning on itself, rising from its 15 year low of 87.15 back to and testing the 90.00 levels this afternoon. Since Friday the Yen has given back to the dollar on renewed risk appetite – up a tentative 1.5%. The Yen’s stellar advance in the past 3 months has seen a decline as the BoJ cut rates near 0% last week and further bad economic news hits the news wires – Trade deficit at record lows -26.7% annualized and further stimulus packages in the works. While we anticipate very thin volumes during the Christmas break the Dollar seems to be set to remain strong as renewed risk appetite and repatriation continues. While we haven’t mentioned it as of late, the “cash is king” maxim is still very much alive.

Today's Key Issues (time in GMT): 21:45 NZD Gross Domestic Product -0.5% Vs -0.2% (QoQ) 21:45 NZD Gross Domestic Product -0.1% Vs 1% (YoY) 23:00 AUD Conference Board Leading Index

The Risk Today: EurUsd Market fell as low as 1.3827 Friday but reversed just over 1.3900 for an intraday move of -2.5%. Our graph shows that the retracement started on the 2nd of December has crossed and confirmed the 50% Fibonacci retracement at 1.4190. A return over 1.5000 will confirm release of the 3-month pressure and may put key resistance 1.6000 into focus. On the downside, 1.3899 and 1.3600, former resistances hold as supports. Further support holds at 1.2208 trend line support. GbpUsd Cable continued to trade lower on Friday, closing near the 1.4980 and continued to push lower – lowest today at 1.4686. Sentiment remains mixed but renewed strength may open the way to 1.6075 (38.2% retracement of 1.8669 – 1.4471 decline) and even 1.6570 (50% retracement). Uptrend may look for 1.6673 30th October high strong resistance. On the downside, former resistance 1.5462 holds support. UsdJpy The Yen gives way to the dollar as the dollar has done against most of the other majors in the last 3 trading days. 88.75 holds initial support, while 87.75 is the pivot of the current trend. Further downtrend may open 79.70 April 1995 low. On the upside, strong resistance holds 100 pivot point, but only a recovery over 103 upper trendline and 105 pivot point will refocus on 108 and 110.67 15th August high. Initial resistance holds 93.91 ahead of 97.43 24th November high. UsdChf USDCHF traded as low as 1.0464 on the 18th, following 8 days of downtrend, but recovered to 1.1109 on Friday on profit taking. Today we are trading slightly lower, 1.0884 daily low. Further weakness may open the way down to 1.0692 22nd September low and as well as 1.0500 and 1.0375. Such a move may look for 1.0013 15th July low in front of 0.9637 17th March low. Renewed up and over 1.2298, 21st November high, strength may look for 1.2463 strong resistance ahead of 1.2506 (61.8% retracement of 1.4278 – 0.9639 decline).

Resistance and Support: EURUSD GBPUSD USDJPY USDCHF 1.6000 K 1.5679 S 92.78 P 1.1550 T 1.5000 S 1.5186 M 91.92 P 1.1332 S 1.4867 S 1.4926 M 90.25 M 1.1114 M 1.4190 1.4804 89.75 1.0950 1.3899 M 1.4783 M 89.52 M 1.0853 K 1.3600 S 1.4640 S 88.71 P 1.0770 P 1.2208 T 1.4490 T 87.16 T 1.0687 K S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot