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Daily FX Report

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The JPY gained against a basket of major currencies

Mon, Dec 1 2008, 11:44 GMT
by Varengold Bank Research Team

Varengold Wertpapierhandelsbank AG

Good morning from wonderful Hamburg. The fight against the global economic recession will determine this trading week. Investors expect that many central banks will take interest rate measures. However we hope for successful trades and wish you a nice start in this week.

Market review

The JPY gained against a basket of major currencies on expectations of an interest rate cut by central banks in major economic zones this week. This step seems to be necessary to fight against the economic recession. Central banks including the ECB, the BoE, the RBA and the RBNZ review interest rates this week. On Friday the EUR lost around 1.6 % against the USD with a day-closing at 1.2695. The pair trades currently around 1.2670. Investors may refrain from building large positions ahead of these meetings in case of any central bank could surprise with bigger-than-expected rate cuts. Larger rate reductions would increase the risk in carry trades against the low-yielding JPY. The USD/JPY fell 0.2 % to 95.33, while the EUR/JPY lost 0.5 % to 120.70 from 121.22 on Friday. The EUR/JPY weakened for a fifth day, which is its longest period since October 6th on speculation the ECB will lower rates this week.

The interest rate meetings also influenced the AUD. On Friday the AUD/USD fell 1.2 % to 64.76 while the AUD/JPY lost 1.4 % to 61.72. It will be the fourth straight reduction of the RBA with a forecast of 75 bps to 4.5 % while a lot of traders believe a 150 bps rate slash by the RBNZ to 5 % on December 4th. The NZD/USD declined 1.2 % to 54.21 while the NZD/JPY lost around 1.43 % to 51.67.

USD/CHF

On a short-term view the USD/CHF has been trading in a bullish Fibonacci Fan and a support level at 1.21. After touching the lower Fibonacci Fan line, the market recovered very strong and trades now at the 1.21 and the upper Fibonacci support level. If the market doesn’t break these lines it could continue its short-term bullish phase.

EUR/CHF

Since August the EUR/CHF has been trading in Fibonacci retracement lines. After touching the lower retracement at 1.428 the market has shown a pull-back. Now the market seems to make a return after touching the 61.8 % line. If the pair breaks through the 50 % retracement level it could show further bearish movements.

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Published on  Mon, Dec 1 2008, 11:51 GMT