The overall mood of the forex market is that of uncertainty - so it’s unsurprising that many people are speculating about what’s going to happen next. Are we going to see a sudden USD rally into 2008 or is the USD still doomed? Banks like Deutsche Bank, Royal Bank of Scotland are saying the USD may appreciate between 4-7% against the Euro in 2008, aided by observations that the US budget and trade deficits are narrowing together for the first time since 1995.

On the other hand, financial firms like Citigroup and Merrill Lynch, ABN Amro are predicting the USD is going to decline to at least 1.4700 against the Euro. I say, don’t put your money on other people’s predictions. After all, these firms are casualties of the subprime mess.

The Japanese yen gained today after Moody said it may lower ratings on $105 billion of debt sold by structured investment vehicles - the biggest credit rating cuts since subprime problems bled into credit markets. Yen crosses are still looking slightly bearish.

EUR/USD is currently lying on the up trendline, with 1.4580-1.4600 being the intermediate support. Nearest resistance is around 1.4710-20, 1.4780-1.4800.

Swissy’s nearest resistance around 1.1350, 1.1400-20.

Tuesday:Eurozone PPI 1000 GMT

Bank of Canada rate decision 1400 GMT (rate expected to stay at 4.5%)

Australia rate decision 2230 GMT (rate expected to stay at6.75%)

Posted in Categories: Forex.

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