EUR/USD RECORD

Sept. 11 (Bloomberg) -- The dollar weakened to near a record low against the euro after Federal Reserve officials signaled the need for interest-rate cuts, eroding demand for dollar- denominated assets.

The U.S. dollar index sank to a 15-year low against six major currencies as Fed Governor Frederic Mishkin and Fed Bank of San Francisco President Janet Yellen said yesterday credit-market losses may slow growth, while a government report last week showed the economy unexpectedly lost jobs in August. The euro rose for a fifth day versus the dollar, its longest winning streak since June.

``Everyone hates the dollar,'' said Steven Butler, director of foreign exchange trading at Scotia Capital Inc. in Toronto. ``The market has a rate cut next week totally priced in. Lots of people are calling for the Fed to do more. The Fed seems to be backed into a corner.''

The dollar fell 0.2 percent to $1.3825 per euro at 10:26 a.m. in New York, after earlier touching $1.3839, the weakest since Aug. 6. The dollar reached a record low of $1.3852 on July 24. The U.S. currency bought 114.01 yen, from 113.71.

Brazil's real led gains among the 16 major currencies against the U.S. dollar, rising 1 percent. Canada's dollar and Sweden's krona increased 0.7 percent and 0.5 percent, respectively.

The New York Board of Trade's dollar index comparing the U.S. currency against its six primary peers, including the euro and yen, fell 0.2 percent to 79.671 from 79.816 yesterday. It earlier touched 79.616, the lowest since September 1992.

`No Reason'

``There is no reason to buy the dollar,'' said Michael Malpede, a senior currency analyst in Chicago at Man Global Research. ``The dollar is pressured by speculation that the Fed is going to cut rates next week. Fed officials have signaled they are worried about downside risks to growth.''

The dollar will drop to $1.40 per euro by October, said Malpede.

The yen fell against all 16 major currencies as a rise in global stocks prompted investors to buy higher-yielding assets funded by loans in Japan.

The Standard & Poor's 500 Index rose 0.6 percent to 1,460.07 after gains in Asian and European equities. Treasuries fell for the first time in three days as demand for the safety of government debt waned.

The spread, or extra yield, investors demand to own emerging-market bonds instead of U.S. Treasuries narrowed 5 basis points, or 0.05 percentage point, to 2.41 percentage points, according to JPMorgan Chase & Co.'s EMBI Plus index. The drop in the risk premium is the biggest since Aug. 31.

The European Central Bank said it drained a record 60 billion euros ($83 billion) from the money market after the overnight deposit rate slumped below the bank's benchmark lending rate of 4 percent.

`Slight Return'

``You are seeing a slight return of risk appetite,'' said Samarjit Shankar, director of global strategy for the Global Markets group in Boston at Bank of New York Mellon, the world's largest custodian bank with over $20 trillion in assets under administration. ``The market now prices in a Fed rate cut next week and there is hope that the credit problems will ease and liquidity will improve. Some of the risk-taking investors are positioning for the eventuality.''

The Japanese currency fell 0.3 percent to 157.51 per euro. The yen dropped 1 percent against the real, 0.9 percent versus the Canadian dollar and 0.4 percent versus the Australian dollar.

`Important Downside Risk'

Mishkin said yesterday there's an ``important downside risk'' to the world's biggest economy and Yellen highlighted ``significant downward pressure.''

Two-year Treasuries yielded 2 basis points less than similar-maturity German bunds amid speculation the Fed will cut its main rate at the Sept. 18 meeting. The U.S. notes lost their yield advantage for the first time in three years last week.

Interest-rate futures show a 56 percent chance the Fed will lower borrowing costs by half a percentage point to 4.75 percent next week. A month ago, traders were expecting a quarter-point cut.

Traders are betting the European Central Bank will raise borrowing costs at least once from 4 percent by year-end.

The implied yield on the December futures contract rose 4 basis points to 4.51 percent. The contract settles to the three- month interbank offered rate for the euro, which has averaged about 16 basis points above the ECB's key rate since 1999.

ECB executive board member Juergen Stark said the decision to leave the benchmark lending rate unchanged last week doesn't mean policy makers have ruled out another increase, Market News International reported.

Fed Chairman Ben S. Bernanke will deliver a speech at 11 a.m. New York time in Berlin today focused on trade and capital flows. He is scheduled to speak from a prepared text without taking questions.

A government report showed the U.S trade deficit narrowed during July.

The trade gap fell to $59.2 billion from a revised $59.4 billion in June. The median forecast of 70 economists surveyed by Bloomberg News was for a deficit of $59 billion.

EURO versus Dollar

The euro strengthened vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3840 level and was supported around the $1.3775 level. Traders await remarks from Federal Reserve Chairman Bernanke from Berlin later today. Comments from Fed officials yesterday evidenced a wide range of opinions concerning the effects of the current global credit crunch on the U.S. economy. Fed Governor Mishkin reported that if “heightened uncertainty” leads to further pullbacks in household and business spending, “it poses an important downside risk to economic activity.” The Federal Open Market Committee convenes one week from today and many traders believe the Fed will reduce the federal funds target rate by up to 50bps. In contrast to Mishkin’s remarks, Dallas Fed President Fisher suggested a steady course of action would be sensible saying “having a steady hand rather than an itchy trigger finger” is what guides him. Fisher added “I set aside the passions of the moment and the conventional wisdom in the markets and keep a steady focus on the Fed's mission. Conducting monetary policy is not a popularity contest.” Data released in the U.S. today saw the July trade balance narrow to –US$ 59.2 billion, down 0.3% from the upwardly revised –US$ 59.4 billion in June. In eurozone news, the European Commission reduced its EMU-13 growth forecast to +2.8% from its previous projection of +2.9%. Likewise, the EC now sees 2007 inflation at 2.0% compared with earlier forecasts of 1.9%. Also, the German August wholesale price index was up 0.5% m/m and up 2.5% y/y. Euro bids are cited around the US$ 1.3620 level.

EUR/USD Weekly recap

The euro appreciated vis-à-vis the U.S. dollar last week as the single currency tested offers around the $1.3795 level and was supported around the $1.3550 level. The pair gained about 140 pips last week. Traders continued to speculate as to what the FOMC will do and say on 18 September. The Fed’s Beige Book saw a “limited” impact of the current credit crunch on the economy outside of housing. Anecdotal August retail sales evidence suggests strong results. A contraction in U.S. August jobs growth and 81,000 downward revision to June’s and July’s tallies will up the Fed’s ante. Atlanta Fed’s Lockhart, Dallas Fed’s Fisher, and St. Louis Fed’s Poole talked up the U.S. economy before the jobs numbers were released.

The ECB kept its main refinancing rate unchanged at 4.00% with Trichet noting rates are still “accommodative” and adding rates could move higher by the end of the year. The EC kept its growth forecasts unchanged and still estimates Q3 GDP growth between 0.3% and 0.8% and Q4 GDP growth between 0.2% and 0.8%. ECB’s Weber called on the markets to monitor the central bank’s reaction to data.

Data released in the U.S. last week saw the August ISM manufacturing survey recede to 52.9; July construction spending was off 0.4%; ADP private sector jobs were up 38,000 in August; August Challenger job cuts were up 85.2% m/m to 79,459; July pending home sales were off 12.2% m/m; Q2 non-farm productivity was upwardly revised to an annualized 2.6%; Q2 unit labour costs fell to their lowest level in one year at +1.4%; August ISM services printed at 55.8; weekly initial jobless claims were off 19,000 to 318,000; August non-farm payrolls fell 4,000; the August unemployment rate held steady at 4.6%; and August average hourly earnings were up +0.3%.

Data released in the eurozone last week saw the August EMU-13 manufacturing PMI survey fall to a 19-month low of 54.3; EMU-13 GDP expanded 0.3% q/q and 2.5% y/y in Q2; August EMU-13 PMI services printed at 58.0; July EMU-13 retail sales were up 0.1% m/m and 0.5% y/y; German July manufacturing orders were off 7.1% m/m; German industrial production was up 0.1% m/m and 4.6% y/y; and Germany’s July current account surplus narrowed to €14.1 billion.

Technical Outlook

Last week’s high (1) was above the 23.6% retracement of the 1.3261-1.3851 range and last week’s low (2) was right around the 50.0% retracement of the same range. The 1.3840/ 1.3910/ 1.3970 levels represent upside resistance targets while the 1.3555/ 1.3421/ 1.3359/ 1.3302/ 1.3273 levels represent downside support targets

Dollar Falls to Lowest in a Month Against Euro on Payroll Loss

Sept. 7 (Bloomberg) -- The dollar fell to the lowest in a month against the euro and weakened versus the yen after a government report showed the U.S. economy unexpectedly lost jobs last month for the first time in four years.

The U.S. dollar index comparing the currency with its six primary peers fell to the lowest in 15 years as the payroll data raised speculation the housing slowdown and credit market turmoil are spilling into the broader economy. Interest-rate futures show traders are betting, with 76 percent certainty, the Federal Reserve will lower rates to 4.75 percent on Sept. 18.

``The things the Fed needs to justify two rate cuts this year are falling into place,'' said Robert Sinche, head of global currency strategy at Bank of America Corp. in New York. ``This is enough of a loss in momentum to put on a rate cut in September.''

The dollar fell 0.6 percent to $1.3771 per euro at 10:46 a.m. in New York. The U.S. currency also declined 1.6 percent to 113.60 yen and earlier reached 113.58. The U.S. currency touched $1.3798 per euro, the weakest since Aug. 9. The dollar dropped to a record low of $1.3852 per euro on July 24.

U.S. Treasury Secretary Henry Paulson said the decline in U.S. payrolls during August was ``not totally surprising.'' He expressed confidence that the economy will still expand in the second half of the year, in an interview with Bloomberg Television.

Euro and Dollar

The yen has gained 6.6 percent against the euro and 9 percent versus the dollar since Bear Stearns Cos. said on June 22 it would bail out a hedge fund that lost money on securities related to loans to homeowners struggling to make payments in the worst housing recession in 16 years.

Investors since then have fled the asset-backed money market and corporate debt while banks curbed lending, forcing global central banks, including the Fed and European Central Bank, to supply cash to ease the credit crunch.

``It's the first clearly recessionary signal out of the economy, and a sign that the subprime problems have crept into the real world,'' said Boris Schlossberg, senior currency strategist in New York at DailyFX.com. ``We'll see a global slowdown led by a U.S. slowdown, and a moratorium on global rate hikes. The focus will begin to shift away from the notion of safe haven in the U.S. to the story of the U.S. recession.''

Payrolls Report

Non-farm payrolls decreased by 4,000 in August from a revised gain of 68,000 a month earlier, the Labor Department in Washington said. It compared with the median forecast of a 100,000 gain in a Bloomberg News survey of 88 economists. The unemployment rate held at 4.6 percent.

This week central banks from the U.K., the 13 country euro region, Canada, Australia and South Korea kept rates unchanged as they assess how the credit squeeze will affect economic growth.

Interest-rate futures show a 76 percent chance the Fed will cut borrowing costs to 4.75 percent from 5.25 percent at its Sept. 18 meeting. The odds of a reduction to 5 percent are 24 percent.

``It added significantly to the dollar-negative sentiment,'' said Alan Ruskin, head of international currency strategy in North America at RBS Greenwich Capital Markets Inc. in Greenwich, Connecticut. ``The Fed rate cut at this month's meeting is a lock. The question is whether the central bank will cut by 25 basis points or 50 basis points.''

The New York Board of Trade's dollar index fell earlier to 79.841, the lowest since September 1992.

Atlanta Fed President Dennis Lockhart said yesterday he hasn't seen ``conclusive'' signs of a housing spillover into the broader economy and warned that inflation has yet to be contained. St. Louis Fed President William Poole said it's not clear yet that the economy will ``nosedive'' and he's not sure of the right response to housing and financial turmoil.

109 Per Dollar

Barclays Capital Inc. strategist Toru Umemoto, the most accurate yen forecaster in 2006 according to a Bloomberg News survey, raised his forecast for the yen to 109 per dollar from a previous estimate of 114.

The pound rose 0.1 percent to $2.0267, rising for a third day versus the dollar, as the yield advantage of the two-year British note rose 7 basis points, or 0.07 percentage point, to 130 basis points over a comparable-maturity U.S. Treasury security.

European Central Bank policy makers signaled their intention to raise interest rates further to contain inflation once financial-market turbulence has abated.

The ECB is ``in a process of adjusting interest rates'' and ``this process hasn't ended yet,'' council member Axel Weber said at a conference in Frankfurt. The ECB, which shelved a planned increase yesterday to leave its benchmark rate at 4 percent, has a ``determination to act in the future whenever it is necessary,'' President Jean-Claude Trichet said at the same event.

FOREX MARKET ANALYSYS

USD

The euro strengthened vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3705 level and was supported around the $1.3635 level. Technically, today’s intraday high was just below the 23.6% retracement of the move from $1.3260 to $1.3850. As expected, European Central Bank kept its main refinancing rate unchanged at 4.00%. ECB President Trichet reported policymakers will act in a “firm and timely manner” to keep inflation below its 2.0% annual target ceiling rate. Trichet also added the ECB will “very closely” monitor price risks over the coming months, noted monetary policy remains on the “accommodative side,” and said policymakers have not ruled out additional tightening by the end of the year. Data released in the eurozone today saw German July manufacturing orders off 7.1% m/m. In U.S. news, the Federal Reserve injected US$ 31.25 billion in temporary reserves today, its latest attempt to provide additional liquidity to the credit markets. Data released in the U.S. today saw Q2 non-farm productivity upwardly revised to an annualized 2.6% growth rate from 1.8%, the highest level since Q3 2005. On the flip side of the coin, unit labour costs fell to their lowest level in one year, reduced to +1.4% from +2.1% and up 4.9% y/y. Anecdotal evidence from U.S. retailers were released today and suggested retail sales were solid last month. Other data released in the U.S. today saw the August ISM services index print at 55.8, unchanged from July’s print. Also, weekly initial jobless claims fell 19,000 to 318,000 while continuing jobless claims rose to 2.598 million. The Fed’s Beige Book was released yesterday and noted “limited” reports of financial markets problems affecting the general economy outside of real estate. Euro bids are cited around the US$ 1.3620 level.

¥/ CNY

The yen came off marginally vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥115.55 level and was supported around the ¥114.80 level. The yen was pressured on traders found little impetus to unwind short yen carry trades. Many traders believe the decisions by major central banks this week to keep interest rates unchanged will pressure Bank of Japan’s Policy Board to keep borrowing costs unchanged for the time being. The most likely scenario probably involves a +25bps increase in the overnight call rate to +0.75% by the end of the year. Data released in Japan overnight cam August machine tool orders up 12.3% y/y. Also, capital flows data reported that foreigners sold a net ¥52.5 billion in Japanese bonds last week. The Nikkei 225 stock index gained 0.61% to close at ¥16,257.00. Dollar bids are cited around the ¥114.55 level. The euro gained ground vis-à-vis the yen as the single currency tested offers around the ¥157.90 level and was supported around the ¥156.75 level. The British pound and Swiss franc gained ground vis-à-vis the yen as the crosses tested offers around the ¥234.00 and ¥96.00 figures, respectively. The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 7.5384 in the over-the-counter market, down from CNY 7.5497. People’s Bank of China announced it will lift banks’ reserve requirements on deposits by 0.5%, effective on 25 September. Most traders believe PBOC will tighten monetary policy further this year and today’s action represented the seventh tightening this year. Chinese President Hu told President Bush China will liberalize the yuan further.

NEWS FOREX WITH FREE SIGNALS

The Dollar rose against the Yen Tuesday, tracking a rally in US equities after a report on August manufacturing eased fears of a steep decline in economic activity. Earlier in the session, the Yen pushed higher as a decline in European stocks reflected the unwinding of risky carry trades that use cheaply borrowed Yen to buy higher-yielding currencies. But gains in US share prices reversed that as did a US manufacturing report that showed only a narrow slowdown in August manufacturing activity.
Analysts said "Equities are still driving currencies, and for now, the market isn't pricing in a radical contraction in US growth".
In late trading, the UsdJpy moved 0.54% higher at 116.43, well off a session low of 115.34. Some analysts had earlier said the Yen received a boost from reports that the Qatar government's $50 billion investment fund intended to increase investments in Asia to offset a weakening Dollar.
The EurUsd ended unchanged at 1.3623 after hitting intraday 1.3551 low. Analysts said investors are cautious about building large positions on the Euro ahead of a European Central Bank policy meeting on Thursday. The ECB last raised rates in June, to 4% from 3.75%, and was widely expected to tighten policy again this month until the latest flare-up of market volatility. Recent poll gave a median 40% chance of a rate hike when the European Central Bank meets on Thursday.
US markets are pricing in a quarter-percentage-point cut to the 5.25% federal funds rate when the Federal Reserve meets on Sept. 18. As early as last week, they were bracing for a half-point cut.
Last week, Fed chief Ben Bernanke said the central bank was prepared to take action as necessary if financial turmoil were to start slowing growth, but added it was not the Fed's job to save speculators from investments gone sour.
Key for markets will be Friday's August US employment report, expected to show 110,000 new jobs added, above July's 92,000 gain. Analyst said a report that comes in below 100,000 would stoke fears that the housing slump and credit crisis has started to cost jobs.
The Bank of England, Reserve Bank of Australia and Sweden's Riksbank are also meeting this week, though only the Riksbank is expected to lift rates.

Today's Key Issues (time in GMT) 00.00 UK Bank of England starts a two-day rate meeting 08.00 EUR August Euro zone PMI services 57.9 vs 58.3 08.30 UK August PMI services 2.5% vs 3.1% (YoY) 09.00 EUR July Euro zone Retail Sales 0.3% vs 0.4% (MoM) 09.00 EUR July Euro zone Retail Sales 1.0% vs 0.9% (YoY) 12.15 US August ADP Employment Change 83k vs 48k 13.00 CAD Bank of Canada rate decision 4.5% vs 4.5% 14.00 US July Pending Home Sales -2% vs 5%

The Risk Today: EurUsd was consolidating between 1.3563 and 1.3720 last week low and high. It get closer to the low range and nearby support which cut in at 1.3550, August 24 low, ahead of 1.3449 low from August 22nd. A move below this would be necessary to threaten the current uptrend, and confirmation of trend end under 1.3360. On the upside, a break toward 1.3687 will pave the way for extended gains to 1.3858 key resistance. GbpUsd failed to confirm a clear break of Trendline resistance 2.0195 to confirm recent uptrend. A break there was required to trigger gains towards 2.0272 and 2.0395 resistances. Uptrend on hold now. On the downside and further to recent development below 2.0100, market looks for a decline towards 1.9916, august 23rd low and potentially 1.9653 key level from August 17th. UsdJpy The downtrend remains intact below 117.13. Renewed weakness may break toward 113.67 support down to 111.60 ,August 17th low, and may open the way to 110.30 (61.8% retracement). On the uptrend, resistance holds 117.13 August 23rd high, before 118.93 (former 23.6% retracement). A more likely break of 116.61 Trendline resistance (downtrend channel) will open the way up. UsdChf went up in a 4 consecutive days, rebounding from 1.1989 low to 1.2153 high. On this uptrend, 1.2183 (38.2% retracement of 1.2771 to 1.1819 decline) is holding strong resistance. Initial support holds 1.1989 Friday low. There is very light support till 1.1819. A break down might open the way toward 1.1529 (61.8% projection).

Resistance and Support:

EURUSD	GBPUSD	USDJPY	USDCHF
1.3858 K	2.0395 K	118.93 S	1.2216 S
1.3776 M	2.0272 S	117.13 M	1.2183 T
1.3687 S	2.0195 S	116.61 T	1.2153 M
1.3585	2.0090	115.75	1.2120
1.3563 M	1.9916 S	113.67 M	1.1962 S
1.3550 P	1.9653 K	111.60 K	1.1819 T
1.3396 T	1.9622 S	110.30 T	1.1529 S
S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot

USD/JPY SIGNAL PREDIKSI

We just saw a USD sell off against the majors as Pending Home Sales came in weaker than expected at -12.2%...

I would like to make an adjustment on our trade as we have major news events coming up this week with ISM Non-Manufacturing data and Non-Farm Payrolls.

Close half our position at market (115.10) to lock in +90 pips. Adjust stop to 116.50 on remaining position. Continue to target 114.00

Good luck!

Stop Adjustment: 2007-09-04 08:30

It was a nice long holiday weekend here in the U.S., but it's time to get back to work with a little stop adjustment as our trade goes our way in USD/JPY.

The pair has moved lower during the morning European trading session, making a low around 115.30 before retracing back up to 115.50.

I would like to reduce our risk in the trade progressively by adjust our stop with every 50 pips movement in our direction. So...

Adjust stop from 118.00 to 117.50.

Looks like risk aversion in the market as USD is currently making a small rally against the majors, except for the Yen. We will see more volatility this week with major reports coming out of the US, so stay tuned for trade adjustments or possible scenarios where we may have to close our position prematurely. Good luck!

Trade Update: 2007-09-01 10:50

Our trade has been triggered short at 116.00 as the pair rallied to 116.50, but shortly fell before the end of the trading day back below 116.00

Again, I stand on the view that we will see more risk aversion to come as we continue to get more and more data on how bad the mortgage mess will effect different aspects of the economy from jobs, consumer spending, economic growth, and so on.

So, we will hold on to this trade and stay tuned for stop and profit target adjustments. Good luck!