Forex - Bailout of Freddie Mac and Fannie Mae boosted confidence in the US financial sector and the Dollar.

Forex News and Events: The Dollar rallied to a one-year peak against a basket of currencies on Monday, as the government's takeover of the country's two biggest mortgage finance agencies boosted confidence in the US financial sector. Overall, analysts viewed the US Treasury move as a positive step in staving off wider financial and housing market weakness. The bailout of Freddie Mac and Fannie Mae, which own or guarantee half of the United States' $12 trillion in outstanding home mortgage debt, also prompted investors to rush back into riskier assets, by buying higher-yielding currencies and selling the Yen. While the news did much to reduce concern about systemic financial market risks, it did little to change fundamentals that had started to drive the Dollar higher prior to the weekend -- slowing growth in the euro zone and the UK. Some analysts though have expressed reservations about the latest US government move and were not ruling out a correction in the Dollar's bullish trend of the past month. In the wake of the Fannie and Freddie takeover, US Treasuries sank and US and European shares rallied. Yesterday, EurUsd fell to 1.4054 low, the lowest in about 11 months. It last traded at 1.4127, down 0.97%. UsdJpy last traded up 0.27% at 108.02. EurJpy was down 0.73% at 152.59. UsdChf rose 1.05% at 1.1300 after having posted 1.1374 high. GbpUsd dropped 0.44% to 1.7582 reversing earlier gains up to 1.7976 high.

Today's Key Issues (time in GMT): 06:00 EUR Germany Exports -1.7% vs 4.2% (mom) 06:00 EUR Germany Imports +7.4% vs -0.1% (mom) 06:00 EUR Germany Trade Balance €11.8b vs €18.1b 07:30 SEK August CPI 0% vs -0.1% (mom) 07:30 SEK August CPI 4.4% vs 4.4% (yoy) 08:30 GBP July Industrial output -0.1% vs -0.2% (mom) 08:30 GBP July Industrial output -1.5% vs -1.6% (yoy) 08:30 GBP July Manufacturing output -0.1% vs -0.5% (mom) 08:30 GBP July Manufacturing output -1.1% vs -1.3% (yoy) 09:00 EUR ECB’s Weber speaks, Frankfurt 12:15 CAD August House starts 195k vs 186.5k 13:00 USD Fed’s Bernanke speaks on education, Washington 14:00 USD July Pending sales -1% vs 5.3% 14:00 USD July Wholesale inventories 0.7% vs 1.1% 21:00 USD weekly ABC CCI -46 vs -47

The Risk Today: EurUsd Market dropped as low as 1.4047 today. Further weakness will put the focus on strong support 1.3666 December 2004 high and 1.3056 support (retracement of 0.8231 – 1.6039 advance). On the upside, only a return over 1.5000 and 1.5500 will release actual pressure and put key initial resistance 1.6000 into focus. Still a break up there would open the way to Trendline resistance 1.6200. GbpUsd Cable dropped to 1.7471 low yesterday. Last week sharp move broke 1.7936 19th April support. Market might find support on 1.7422 (50% retracement of 1.3682 – 2.1161 advance). Strong support holds 1.7251 3rd April low. On the upside, initial resistance holds 1.8304 former support. Strong resistance holds 1.8795 21st August high. Former support 1.9363 holds also strong resistance. Key level holds 2.0100 resistance. UsdJpy Market tested last week the 6-month lower trend line support at 106.50. It posted 105.53 low on Friday. Further pressure may open the way toward 105 pivot (38.2% retracement of 95.75 – 110.67 advance), as well as 102.73 support and 100 pivot point. Initial support holds 105 strong support. Initial resistance holds 109.08 yesterday high. UsdChf Market rose as high as 1.1374 yesterday. Strong resistance holds 1.1593 December 2007 high. On the downside, initial support holds 1.0863. Only renewed weakness below 1.0500 and 1.0375 would retest the 1.0000 pivot point and may open the way toward 0.9637 17th March low.

Resistance and Support: EURUSD GBPUSD USDJPY USDCHF 1.6000 K 2.0100 K 111.92 K 1.2153 T 1.5500 P 1.9363 S 110.67 M 1.1411 S 1.5000 S 1.8304 M 109.18 M 1.1374 M 1.4115 1.7575 107.50 1.1305 1.4047 M 1.7563 M 105.70 M 1.0863 S 1.3666 S 1.7500 S 105.00 P 1.0500 K 1.3056 T 1.7251 S 102.73 S 1.0000 P S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot