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Friday, October 31, 2008
31-Oct Daily Forex Analysis
by: Forexyard


Technical News

EUR/USD
It is seems that the pair's bullish correction has ended after peaking at the 1.3300 level, and the bearish momentum has fully resumed. And now, as all oscillators on the 4-hour chart are pointing down, it appears that the bearish move has more room to go, with a potential price target of 1.2600.


GBP/USD
The cable dropped close to 400 pips yesterday, and is currently traded around the 1.6250 level. A bearish cross on the 1-hour chart's Slow Stochastic suggests that current direction is still bearish. Going short appears to be the right choice today.


USD/JPY
The pair has been range-trading for quite a while now without making a significant breach. Now however, a flag formation on the daily chart indicates that a downtrend is impending. Going short with tight stops might be the right choice today.


USD/CHF
Ever since bottoming at the 1.1200 level, the pair is galloping upward with full speed, and is currently traded around the 1.1470 level. The 1-hour chart is giving exclusively bullish signals, implying that another bullish session is forthcoming. Going long seems to be the right strategy today.


The Wild Card

EUR/CHF
There is a very accurate bearish channel forming on the 4-hour chart, as the pair is now floating in the middle of it. A bearish cross on the 1-hour chart's Slow Stochastic is also suggesting that the bearish move has more steam in it. This might be a good opportunity for forex traders to join a very promising trend.


Economic News

USD

GDP Figures Spark Gains for the Dollar
Big moves were seen in the Dollar yesterday due to better then expected U.S. GDP numbers. The USD gained more then 370 pips against the EUR as GDP dropped the largest percentage in 7 years. GDP contracted -0.3% in the 3rd quarter. The drop was largely contributed to U.S. consumers who cut back in spending. Consumer spending makes up roughly 70% of GDP.

Traders took the better then expected GDP numbers as a positive sign that the U.S. economy may prove more resilient in the face of the economic slowdown. GDP was forecasted to drop -0.5%, but when the numbers beat the street, traders rushed into the Dollar, sending it higher.

This is the second consecutive day the EUR/USD has seen abnormally large price changes. Two days ago, the Dollar lost over 500 pips when the Fed cut Interest Rates by half a percentage point. The unusual price movements have been in response to new market conditions stemming from the global financial crisis in that began in September with the bankruptcy of Lehman Brothers.

Investors may look for the unusual price volatility to continue in the EUR/USD as the pair attempts to stabilize and find new support and resistance lines. The large price jumps such as these are not common place and present terrific opportunities to take advantage of the price swings for large gains. Look for the Dollar to increase its gains on the EUR to close the week at the 1.2760 level.


EUR

EUR Erases Gaines at All Fronts
The EUR gave back almost all gains it had made two days ago when a 0.50% U.S. Interest Rate cut sparked a EUR rally. Today was the opposite as stronger then expected U.S. GDP numbers crushed the EUR.

Adding to the downside of the EUR, the Euro-Zone Consumer Confidence survey dropped to a new low. Inflationary pressures also have all but dissipated, with a weakening European economy that will be focused more on stimulating growth. This may be adding pressure for further rate cuts in the Euro-Zone. The ECB is scheduled to vote on Interest Rates on November 6th, and the European Central President, Jean Claude Trichet, has already confirmed that a cut is expected, yet the size of the cut is still unknown. Investors that fear a 0.5% cut are another leading factor for keeping the EUR at its current weak levels.

As for today, a batch of data is expected from the Euro-Zone. Special attention should be given to the Consumer Price Index (CPI) Flash Estimate, which is scheduled at 10:00 GMT. This survey is expected to be released on the last business day of the current month. Previous experience shows that because of its earliness it tends to create waves in the market. Traders should also follow data releases from the U.S, as any price shift of the USD will have a direct impact on the EUR.


JPY

Bank of Japan Cuts Interest Rates to 0.3%
The JPY was hit with a large loss against the Dollar yesterday of 183 pips to close the day down at 98.44. A rise in the U.S. stock market helped moved the Yen lower. As equity markets recoup recent losses, investors move money from the safety of the JPY to riskier and higher yielding assets.

The Bank of Japan cut Interest Rates today for the first time in 7 years to 0.30 % from 0.50 %, joining global efforts to contain the financial crisis despite the estimation that this reduction will probably have a little economic effect. In addition, Japanese Prime Minister Taro announced yesterday a new economic relief package. The latest relief package will come in the way of tax cuts for consumers and businesses as well. The Japanese economy has been hit hard by the recent appreciation of the JPY, sending the nation's heavy economy export into a tailspin.

In fact, economists have their doubts as to the effectiveness of the newest relief package. Rather then spending the extra money received from the government, the Japanese consumer has the propensity to save. As a result, it may have a negative impact on the JPY and push the Yen lower against its crosses.


Oil

Reduced Economic Output Sends Crude Lower
Traders are attempting to balance opposing forces: a global economic slowdown that threatens to lower all commodity prices, or a future OPEC decision to reduce output that may raise the price of Crude.

Crude Oil fell more $5.16 yesterday, erasing the previous day's gains to close at $64.52. Lower demand for Crude amid the world's slowing economies is pushing prices lower. The drop in U.S. GDP reaffirmed the recessionary fears. Look for further declines in global growth to send Crude Oil lower to a level of $55-$65.

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Oct-31 Market Commentary and Technical Levels

Fri, 31th of October, 2008
By Setyo Wibowo (analyst@fxinstructor.com)

EURUSD Outlook
The EURUSD attempted to push higher yesterday. After broke the 1.3200 resistance (23.6 Fibo from 1.6038 to 1.2333), the pair topped at 1.3289, but further bullish correction was rejected as the pair quickly fell, hit the bottom at 1.2804 and closed at 1.2875. Although I think we might see another bullish attempt, this upside rejection should keep the bearish scenario intact. My model is mixed with downside bias. Immediate resistance is seen at 1.3006. Initial support at 1.2735 followed by 1.2590.

EURUSD Daily Supports and Resistances:

  • S1= 1.2686
  • S2= 1.2498
  • S3= 1.2192
  • R1= 1.3180
  • R2= 1.3486
  • R3= 1.3674


GBPUSD Outlook
The GBPUSD failed to maintain bullish momentum yesterday. The pair attempted to push higher, topped at 1.6670 but closed lower at 1.6371. This upside failure should keep the major bearish scenario intact, but in this volatile market we might see another bullish attempt as CCI also in oversold area on weekly and monthly chart. My model is mixed with downside bias. Immediate resistance is seen at 1.6408. Initial support at 1.6215 followed by 1.6035.

GBPUSD Daily Supports and Resistances:

  • S1= 1.6164
  • S2= 1.5957
  • S3= 1.5704
  • R1= 1.6624
  • R2= 1.6624
  • R3= 1.7084


USDJPY Outlook
The USDJPY continued it’s bullish correction yesterday. The pair topped at 99.14 and closed at 98.63. However the pair was traded lower early today in Asian session around 98.30 at the time I wrote this comment. My model is mixed with neutral bias in nearest term, but with upside bias in longer term. Immediate support is seen at 97.60 followed by 96.80. CCI in neutral area on daily chart.

USDJPY Daily Supports and Resistances:

  • S1= 97.58
  • S2= 96.54
  • S3= 95.76
  • R1= 99.40
  • R2= 100.18
  • R3= 101.22


USDCHF Outlook
The USDCHF failed to maintain the bearish momentum yesterday. The pair topped at 1.1478 and closed at 1.1425. This fact should keep the major bullish scenario intact. Only a consistent move below 1.1250 could trigger further bearish corrections. Immediate support is seen at 1.1375 followed by 1.1325. Initial resistance at 1.1478 (yesterday’s high) followed by 1.1550. CCI in neutral area on daily chart.

USDCHF Daily Supports and Resistances:

  • S1= 1.1258
  • S2= 1.1092
  • S3= 1.0982
  • R1= 1.1534
  • R2= 1.1644
  • R3= 1.1810

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Thursday, October 30, 2008
Oct-30 World Daily Markets Briefing
by: ADVFN Newsdesk


Forex

FOREX-U.S. dollar slides as global optimism rises

NEW YORK - The dollar weakened for a second straight session on Thursday, as an easing in extreme risk aversion among investors boosted equities worldwide following a Federal Reserve rate cut the previous
session.

Data showing a smaller-than-expected contraction in the U.S. economy in the third quarter underpinned sentiment on risky assets, including higher-yielding currencies, and helped the dollar hold gains versus the yen.

Still, the fall in U.S. gross domestic product in the last quarter was the sharpest contraction in seven years. "The GDP number is bad but it's not horrible. At this point any number that is not disastrous is considered positive for risky assets and bad for the dollar and yen," said Boris Schlossberg, director of currency research at GFT Forex in New York.
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But he was skeptical about the sustainability of the rally in stocks and of high-yielding currencies such as the euro, sterling and the Australian dollar. "These currencies have had a steep short-covering rally in recent days against the dollar and I don't know how much further they can go. There's strong
resistance at $1.32 in euro/dollar."

In early New York trading, the the euro was up around 0.6 percent at $1.3030 in volatile trade, pulling further away from a 2-1/2-year low of $1.2329 hit this week on electronic trading platform EBS.

The ICE Futures dollar index, which measures the dollar's value against six other major currencies, fell 1 percent to 84.232. Despite its broad losses, the dollar climbed 1.2 percent to 98.65 yen, extending its recovery from a 13-year trough just below 91 yen touched on EBS late last week.
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Sterling rose 0.2 percent against the dollar to $1.6453 while the Australian and New Zealand dollars rose roughly 2 percent and 1 percent respectively.

Higher share prices showed some investors had retreated from extreme risk aversion seen after a meltdown in the banking sector triggered waves of selling in past weeks.

The recovery in stocks and high-yielders was triggered by the Fed -- the U.S. central bank -- reducing borrowing costs by a half percentage point to 1 percent on Wednesday and leaving the door open for further easing of monetary policy.

The Fed also approved on Wednesday currency swap lines with central banks in several major emerging countries, making dollars available to help them deal with the credit crunch.
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Analysts, however, expressed caution about the market's renewed optimism, saying for instance that the U.S. GDP report was a harbinger of distressing things to come. "I think the relief over the GDP's headline number will not last long," said Brian Dolan, chief currency strategist at Forex.com in Bedminster, New Jersey.

"The report points to terrible outlooks for U.S. firms and U.S. stocks, so the initial rally should not last and we may be in for a downdraft in risky assets."

The GDP report showed a steep pullback in consumer spending. which fuels two-thirds of U.S. economic growth. It fell at a 3.1 percent annual rate in the third quarter -- the first cut in quarterly spending since the closing quarter of 1991 and the biggest since the second quarter of 1980.



US Stocks at a Glance

US STOCKS-Market rises on rate-cut boost, credit thaw

NEW YORK - U.S. stocks rose on Thursday as investors bet that a spate of interest rate cuts by central banks around the world, including the Federal Reserve, will help lessen the impact of global recession.

While the cuts should drive down the costs of borrowing, investors were also encouraged by signs that efforts to unlock jammed credit markets continued to free up cash needed to avert a sharp downturn. Buyers waded back into the market in search of beaten-down shares, particularly in energy, financials and technology sectors.

Companies posting stronger-than-expected earnings included Colgate-Palmolive Co, up more than 7 percent, and Exxon Mobil, whose third quarter profit jumped to a record $14.83 billion.

Among interest-rate sensitive stocks, including banks, Citigroup shares jumped more than 3 percent. Home builders were another bright spot, with the Dow Jones home construction index .DJUSHB up 5.5 percent.

"If my theory is correct, the markets have discounted a much worse recession," said Subodh Kumar, chief investment strategist at Subodh Kumar & Associates in Toronto. "Yesterday's rate cut was much for psychology."

The Dow Jones industrial average climbed 209.08 points, or 2.33 percent, to 9,200.04. The Standard & Poor's 500 Index gained 27.04 points, or 2.91 percent, to 957.13. The Nasdaq Composite Index rose 43.64 points, or 2.63 percent, to 1,700.85.

Thursday's government data helped underscore why the Fed deemed it necessary to cut rates on Wednesday.

Data showed that gross domestic product, which measures the output of all goods and services within U.S. borders, experienced its sharpest contraction in seven years in the third quarter, but the slippage was slightly less than expected.

The Fed cut its benchmark fed funds rate by half a percentage point to 1 percent on Wednesday, action that was soon followed by cuts in Taiwan and Hong Kong.

Japan is expected to cut rates on Friday, while the European Central Bank, Australia and the Bank of England are expected cut rates next week. China also cut on Wednesday.

Shares of Colgate-Palmolive Co rose to $64.46 on the New York Stock Exchange, where Citigroup shares rose to $13.15. Among home builders, luxury home builder Toll Brothers TOL.N climbed nearly 5 percent to $21.13.

On Nasdaq, shares of Apple Inc, maker of the iPhone and iPod, rose 4.4 percent to $109.22. Technology shares are among sectors that analysts see poised to be the biggest beneficiaries in an economic revival.

Shares of Exxon Mobil, however, succumbed to profit-taking following quarterly results to trade off 0.8 percent at $74.10. Shares of rival Chevron were up 1.4 percent at $72.97 ahead of the company's results on Friday.

The costs for banks to borrow dollars from each other over three months fell for a 15th straight day on Thursday, suggesting efforts to restore confidence in the credit markets are beginning to bear fruit.


Europe share

Banks, miners help lift European stocks by midday

LONDON - European shares were higher midday on Thursday, led by banking stocks after encouraging results from Deutsche Bank, though energy stocks were weaker.

By 1210 GMT, the FTSEurofirst 300 index of top European shares was up 2 percent at 915.37 points, adding to a 7.5 percent rise on Wednesday. Banking stocks added the most points to the index. Deutsche Bank gained 15.6 percent after the group avoided a third-quarter loss thanks to new accounting rules but unveiled heavy losses in proprietary trading as global financial markets remained rocky.

"Deutsche Bank results were much better than expected. This is influencing gains in the banking sector to a degree," said David Buik, partner at BGC Partners. "The banking sector is also at horribly low valuations, unrealistic of their true values, and investors are now starting to put money in," he added.

Banco Santander, UniCredit, Credit Agricole, Credit Suisse and UBS were up between 3.7 and 7.9 percent. Miners were also heavyweight gainers across Europe. Gold rose to near a one-week high on safe-haven buying as the U.S. dollar posted its biggest one-day drop in 23 years after the U.S Federal Reserve cut interest rates by half a percent on Wednesday.

Anglo American, BHP Billiton, Lonmin, Kazakhmys, Rio Tinto, Vedanta Resources and Xstrata were up between 3.9 and 11.3 percent. "The mining sector is still off 50 percent from where it was three months ago. There is still demand for iron and copper," Buik added.

Across Europe, the FTSE 100 index was up 1.65 percent, Germany's DAX was 4.2 percent higher, and France's CAC 40 was up 1.2 percent.

Energy stocks slipped, with Royal Dutch Shell Plc falling 1.9 percent despite third-quarter results beating forecasts. BP and Total were also down. "Oil has had big moves recently, so we can expect a bit of profit taking," said Buik.

Among individual stocks, Irish drug-maker Elan slumped 21 percent after U.S. marketing-partner Biogen Idec reported a new case of a potentially deadly brain disease in a patient being treated with Elan's flagship drug Tysabri.

But Volkswagen surged 11 percent as the group reaffirmed its full-year targets after posting third-quarter operating profit that just missed expectations.


Asia at a Glance

Asian Market Summary

Asian stocks were set for a record rise and a third straight day of gains on Thursday as lower borrowing costs and international efforts to provide liquidity to emerging markets coaxed investors from safe havens like the yen.

Markets in Japan, Hong Kong and South Korea rocketed 10-12 percent higher, dragging along commodity prices in the wake of the Federal Reserve's cut in rates to the lowest since June 2004, aimed at softening the blow of a potentially deep U.S. recession.

China, Hong Kong, Norway and Taiwan all delivered cuts of their own, and pressure mounted on the Bank of Japan to reduce rates after it meets on Friday.

In active trade, the benchmark Nikkei climbed 817.86 points to end at 9,029.76, the highest close since Oct. 22. The 10 percent jump was the biggest one-day gain since Oct. 14, when the Nikkei surged 14.2 percent for the biggest one-day gain in its history.

The benchmark remains down 41 percent so far this year, but it has gained 26 percent over the past three days. The broader Topix shot up 8.3 percent to 899.37.

The benchmark Shanghai Composite Index closed up 43.80 points or 2.55 pct at 1,763.61, after falling to a 25-month low yesterday.

Turnover was little changed at 35.41 bln yuan compared with 35.42 bln yesterday. The weighted index closed up 277.12 points or 6.29 pct at 4,683.64, after moving in the range of 4,448.51 and 4,684.11. Turnover was 67.70 bln twd.

The KOSPI index is now up 21.5 percent from the year's low of 892.16 hit on October 27, but down 43 percent on the year.

The Hang Seng index closed up 1,627.78 points or 12.8 pct at the day's high of 14,329.85, off a low of 13,280.44. It was the index's second-biggest percentage gain this year after Tuesday's 14.35 pct surge.

The benchmark S&P/ASX 200 closed up 155.5 points at 4,001.1, based on the latest available data, extending a 1.3 percent gain on Wednesday. Prior to that the index had fallen for five sessions in a row, losing 12 percent on global recession fears.

New Zealand's benchmark NZ50 index firmed 17.2 points, or 0.6 percent, to 2,762.8. Top miner, and the benchmark index's top weighted stock, BHP Billiton roared up 8.7 percent to A$28.60, while rival and takeover target Rio Tinto jumped 9.2 percent to A$77.32.

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by: Forexyard


Technical News


EUR/USD
The pair continues to make bullish sounds, and is currently testing the 1.3200 level. However, it appears that the 1.3250 level has now become a strong resistance level, and a breach of that level might validate the continuation of the upward move.


GBP/USD
There is a very accurate bullish channel forming on the 4-hour chart as the cable is now floating in the middle of it. The RSI on the daily chart has crossed the 30 line, and the Slow Stochastic is still pointing up, all suggesting that another bullish session is pending. Going long appears to be the right choice today.


USD/JPY
Ever since bottoming at the 91.00 level, the pair has entered a very strong bullish trend and is currently traded around the 98.70 level. And now, a flag formation on the 4-hour chart suggests that the bullish move has more room to go.


USD/CHF
A very sharp bearish movement took place yesterday, as the pair dropped over 300 pips. The current price is floating beneath the Bollinger Bands lower border, indicating that the bearish move is still quite strong. Going short appears to be the right strategy today.


The Wild Card


Gold
Gold prices are appreciating on a daily basis lately, and an ounce of gold is currently valued at $770. And now, all oscillators on the daily chart are pointing up, implying that the bullish momentum has more steam in it. This might be a great opportunity for forex traders to join a very popular trend.



Economic News

USD

Interest Rate Cut Creates Massive One-Day Loss for USD
In a move anticipated by most market analysts, the Federal Reserve cut target lending rates yesterday to a level not seen in almost 50 years! This was done in an attempt to prevent a widening financial crisis from tipping the U.S. economy into a prolonged recession. It was not the first time the Fed cut rates to stave off further economic disaster during these most recent times of financial hardship.

Less than a month ago the Fed joined the European Central Bank (ECB), as well as other counterparts from the U.K., Canada, Sweden and Switzerland, in a coordinated reduction of interest rates, cutting its target rate by a half percentage point to 1.50%. Now, as a result of yesterday's further rate cut, the Dollar posted its biggest one-day fall against almost all of its major currency counterparts.

The Dollar was already beginning to trade above $1.3200 per EUR in today's early trading sessions, after dropping 2.2 % yesterday, and has also climbed above 1.6500 against the GBP. The Fed may also be expected to lower benchmark interest rates even further in the coming months given the downbeat economic outlook provided by the Fed's policy statement yesterday.

The market has been trading on a recovery theme lately; there is still a lot of uncertainty, and risk aversion is very much in place. If risk appetite continues improving, the Dollar may get even weaker. Despite showing signs of recession in the U.S. economy, the Fed's maneuver put the focus on the interest rate differential, and that might force the Dollar to go even lower no matter how the Advanced GDP figures appear when they are released later today.


EUR

EUR Finds its Strength from Weakened USD
The EUR rose against the Dollar to 1.3200, marking a distinct rebound from last week's doldrums. The 15-nation currency rallied after the U.S. Federal Reserve slashed its target rates by half a percentage point yesterday and also left the door open to further reductions if needed. The EUR made further gains following Germany's announcement of its preparation of an economic stimulus package. Deutsch Bank AG, the largest bank in Germany, also declared surprising profits after implementing a change to its accounting rules.

The USD no longer appears to be a save-haven for traders after the Federal Reserve released a statement that the pace of economic activity appears to have slowed significantly. The British Pound has also advanced against the Dollar as a report showed that mortgage approvals rose for the first time since June 2007.

The Bank of England (BoE) said lenders approved 1,000 more home loans last month than in August, and the government is expected to pledge extra borrowing today to support the economy as it enters its first recession since 1992. The Pound had its biggest intra-day decline versus the Dollar on Oct. 24, when a government report showed the economy contracted in the 3rd quarter by more than twice as much as economists predicted. This indicates that economic news is beginning to once again have a larger impact on the movement of the major currencies.

While appearing to gain strength recently, the EUR may in fact see a reversal to yesterday's giant upswing. News being released from the Euro-Zone today will likely show higher-than-expected unemployment in Germany and decreased consumer confidence throughout the region. While indicators have had less impact these past weeks due to the financial crisis, they nevertheless still carry weight in the confidence of investors; any negative economic data will have the potential to cause harm to the currency's value.


JPY

JPY's Excessive Volatility Ending as Japan Considers Cutting Interest Rates
As the market's speculation increases that the Bank of Japan (BoJ) will lower its interest rates, the Yen fell for a second day against its currency counterparts, extending its largest ever decline. The first motivation for a potential rate cut is to stem the Yen's appreciation; another motivation is to try to prop up the economy.

Yesterday, Japan's currency dropped 0.5% versus the pound to 156.47 on speculation investors will revive carry trades. In carry trades, investors borrow in currencies with low interest rates and invest in currencies with a higher yield. Japan's target rate of 0.5% is the lowest among major economies. The potential BoJ rate cut led to an unwinding of safe-haven flows to the JPY. Perhaps what has been driving the Yen to its recent strength is not speculation, but the repatriation of Japanese investors and de-leveraging by global investors.

The Group of Seven (G7) issued an unscheduled statement on Oct. 27 saying it was concerned about "the recent excessive volatility" in the JPY. The Japanese government has also stated that it may intervene in foreign exchange markets by arranging purchases and sales of currencies, if necessary.


Oil

Crude Oil Prices Climb after USD Takes a Hit
Crude Oil prices gained almost 9% yesterday as the Dollar posted its biggest one-day drop following the U.S. interest rate cut. Crude Oil prices surged to almost $69 a barrel as the weak Dollar and data from the U.S. government showed crude stocks rose less than expected last week and gasoline supplies fell unexpectedly.

The prices appreciated on speculation the U.S. Federal Reserve rate cut will help spur a recovery in the world's biggest fuel-consuming country. Investors often purchase Crude Oil, and other dollar-priced commodities, when the U.S. currency drops because of their use as an inflationary hedge. Like other commodities, Oil has become more sensitive to the gyrations of the wider economy as the global financial crisis widens. Moreover, the OPEC cartel decision last week to cut output by 1.5 million barrels per day, as well as hints that it may cut production further, have also helped to stabilize Crude Oil prices in the market.

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Oct-30 Market Commentary and Technical Levels

Thu, 30th of October, 2008
By Setyo Wibowo (analyst@fxinstructor.com)


EURUSD Outlook
The EURUSD continued it’s bullish momentum yesterday. The pair topped at 1.2991 and closed at 1.2951. Early today in Asian session the pair was traded higher around 1.3060 at the time I wrote this comment. This fact should open the door for a further upside correction scenario towards 1.3200 (23.6% Fibonacci retracement from 1.6038 to 1.2333). My model is mixed with upside bias. Immediate support is seen at 1.2920 followed by 1.2810. CCI just cross -100 line up on daily chart suggesting a potential bullish view.


EURUSD Daily Supports and Resistances:

  • S1= 1.2720
  • S2= 1.2489
  • S3= 1.2354
  • R1= 1.3086
  • R2= 1.3221
  • R3= 1.3452


GBPUSD Outlook
The Sterling also continued it’s recovery against Greenback yesterday. The pair topped at 1.6474 and closed at 1.6360. This fact should trigger further upside correction scenario towards 1.7113 (38.2% Fibonacci retracement from 2.0158 to 1.5262). My model is mixed with upside bias. Immediate resistance is seen at 1.6560 followed by 1.6775. CCI just cross -100 line up on daily chart suggesting a potential bullish view.

GBPUSD Daily Supports and Resistances:

  • S1= 1.5601
  • S2= 1.5182
  • S3= 1.4964
  • R1= 1.6238
  • R2= 1.6456
  • R3= 1.6875


USDJPY Outlook
The USDJPY bullish momentum seemed to lose power yesterday. The pair bottomed at 96.07 but closed higher at 97.39. However, early today in Asian session there are some upside pressures as the pair was traded higher around 98.75 at the time I wrote this comment. My model is mixed with upside bias. Immediate support is seen at 97.10. Initial resistance at 99.68. CCI just cross 100 line up on 4h chart suggesting a potential upside pressures.

USDJPY Daily Supports and Resistances:

  • S1= 96.15
  • S2= 94.91
  • S3= 93.75
  • R1= 98.55
  • R2= 99.71
  • R3= 100.95


USDCHF Outlook
The Greenback slumped against Swiss Franc yesterday. The pair bottomed at 1.1251 and closed at 1.1304. This fact should trigger further downside correction towards 1.0090 area. My model is mixed with downside bias. Immediate resistance is seen at 1.1340. Initial support at 1.1205 followed by 1.1158. CCI heading down towards -100 line on daily chart suggesting some downside pressures.

USDCHF Daily Supports and Resistances:

  • S1= 1.1175
  • S2= 1.1047
  • S3= 1.0843
  • R1= 1.1507
  • R2= 1.1711
  • R3= 1.1839

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Wednesday, October 29, 2008
Oct-30 ForexYard Indicator Report
by: Forexyard


Be Prepared! U.S. ADVANCED GDP Tomorrow At 12:30 GMT!

We at ForexYard encourage our customers to get involved in the most intense market events. As such, we think you should know that the U.S. Advanced Gross Domestic Product (GDP) figures are expected tomorrow, October 30th, at 12:30 (GMT), and you need to be prepared. Market events like this one tend to create either big changes to current trends or push current trends even further. Generally, the majors are the ones most affected by market events in general, but Crude Oil, Gold prices, and even the price of Silver can change dramatically in the seconds after such a publication. For more information about the U.S. Advanced GDP, please read below.


What is the

The Advanced Gross Domestic Product (GDP) is a survey that is being used to measure the annualized change in the value of all goods and services produced by the relevant economy. It is defined as the total market value of all goods and services produced within the U.S. economy in one quarter, in this case the 3rd quarter. The survey is released on a quarterly basis and it measures the differences compared to the same quarter in the previous year. There are 3 versions of the GDP, released one month apart - "Advanced", "Preliminary" and "Final". The "Advanced" estimates are based on source data that is incomplete or subject to further revision by the source agency, while the adjusted figures are delivered through the 'Preliminary' version.

Traders follow this survey very closely because it is considered to be the broadest measurement of economic activity and a primary gauge of an economy's health.


If the Survey Comes Inline with Market Forecasts

Expectations for this quarter reveal that the Advanced U.S. GDP figures will probably fall from 2.8% on the 'Final' publication to -0.5% on the 'Advanced'.

Previous surveys have shown that GDP publications that go inline with market forecasts tend to leave the Dollar unchanged. They have also shown that in cases where publications have beaten analysts' forecasts, the market was greatly impacted, and the USD had instantly rose, usually in a dramatic trend.

Because of the perceived economic weakness in the U.S. economy, any measure above the forecasted value may act as a positive that could return the USD's previous bullish run against the EUR. We may see a EUR/USD rate of 1.2700 continue through the week's end.


If the Survey Will Surprise With Bearishness

When the actual figure is lower than forecasted, investors are likely to see the USD depreciating against its currency pairs and crosses.

Previous indicators relating to consumer spending, sentiment, and retail sales all came in below their expected values. Also the failure of Lehman Brothers in September caused major turbulence in the financial markets during the third quarter. American citizens may have been spooked by this event and kept their spending tight in the previous quarter. GDP numbers may be negatively affected as private consumption contributes a large percentage of the calculation. This leads us to believe that Advanced GDP may fail to meet expectations and send the USD lower against the EUR, possibly to the 1.3000 level.

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29-Oct World Daily Markets Briefing
by: ADVFN Newsdesk


Forex

FOREX-Dlr falls broadly on firmer stocks; Fed in sight

LONDON - The dollar fell against other major currencies on Wednesday, as markets expected the U.S. Federal Reserve to deliver a substantial interest rate cut later in the day and as share prices gained in
Europe and Asia.

The yen also lost ground on talk that Japan's central bank may jump on the monetary easing bandwagon even though it already has rock-bottom interest rates. Higher-yielding currencies, such as the euro and sterling, were bolstered as risk aversion eased somewhat. However, sentiment remained fragile and analysts questioned whether such gains would be sustainable.

"The dollar has proved to be the weakest currency today on rate cut expectations and a bounce in equity markets," said Adarsh Sinha, currency strategist at Barclays Capital in London. "The dollar and yen have been negatively correlated with rises in equities. But t here is a lot of uncertainty and it's not obvious the situation will last."

At 1156 GMT, the euro was up half a percent against the dollar at $1.2790. Against the yen, the euro was down 1 percent at 124.34 yen, but still well above recent six-year lows below 114 yen.

The dollar was down 1.7 percent against the yen at 97.02 yen, having gained more than 6 percent on Tuesday. The Fed will announce its rate decision at 1815 GMT after concluding its two-day rate-setting Federal Open Market Committee meeting on Wednesday.

Markets expect the Fed to cut the benchmark federal funds rate by at least 50 basis points, which would bring it down to one percent, with some traders suggesting it might even cut rates by 75 basis point.

Meanwhile, speculation grew that the Bank of Japan could cut interest rates on Friday. That helped the Nikkei index of Japanese shares close 7.7 percent higher.

The yen briefly dipped against the dollar after China said it was cutting interest rates, having eased borrowing costs earlier the month in coordination with other major central banks.

China's central bank cut banks' benchmark lending and deposit rates by 0.27 percentage point on Wednesday. The PBOC gave no reason for the easing, which takes effect on Thursday .

"There's building evidence in China that the slowdown we're seeing everywhere else is taking place there as well," said Derek Halpenny, European head of FX research at BTM-UFJ in London. "The last time China cut rates was on the day of the coordinated action -- that's what the market will speculate on but we're not in the extreme circumstances we were in when they made the first coordinated move."

Markets expect the European Central Bank to cut its key interest rates by another half point at its November meeting and the Bank of England is also expected to slash rates next week.



US Stocks at a Glance

US STOCKS-Energy shares lead Dow higher

NEW YORK - The Dow turned positive and the S&P 500 and Nasdaq cut losses on Wednesday on optimism about a possible interest rate cut and as higher oil prices boosted energy shares.

U.S. stocks had earlier been down more than 1 percent as investors locked in profits after Tuesday's steep gains.

The Dow Jones industrial average .DJI was up 8.68 points, or 0.10 percent, at 9,073.80. The Standard & Poor's 500 Index was down 2.53 points, or 0.27 percent, at 937.98. The Nasdaq Composite Index was down 7.82 points, or 0.47 percent, at 1,641.65.



Europe share

Banks boost European shares; eyes on Fed rates

LONDON - European shares were up nearly 5 percent at midday on Wednesday, led higher by banks ahead of the U.S. Federal Reserve's interest rate decision later in the day and after China unveiled its own rate cut.

By 1157 GMT, the pan-European FTSEurofirst 300 index was 5.1 percent higher at 877.3 points, having touched 881.5 earlier, rising for a second consecutive day after five days of losses. "I think everybody now is looking for the central banks to take a knife to interest rates and really just cut them very aggressively from here onwards," said Mike Lenhoff, chief market strategist at Brewin Dolphin.

The index has shed 42 percent so far this year, amid turmoil across the financial markets that has seen banks broken up or nationalised and left investors fretting about the onset of global recession. "I'm not sure that everyone is looking at this as a turn in the market just yet, but it certainly provides a bit of healthy respite from what has been a fairly dreary, monotonous and tedious bear market," said Lenhoff.

Wall Street marked its second best day ever on Tuesday, with major U.S. stock indexes surging around 10 percent. The Federal Reserve is set to announce its rate verdict at 1815 GMT. In a Reuters survey, primary dealers expected the Fed funds rate will be cut to 1 percent from 1.5 percent.

Japan may also cut borrowing costs this week, a source with knowledge of the matter said. Tokyo's Nikkei average soared 7.7 percent. The European banks were the outstanding gainers, with Santander up 9.8 percent, UBS up 11.3 percent, and Standard Chartered adding 16.7 percent.

BBVA rose more than 8 percent after saying nine-month recurrent net profit rose 9.1 pct to 4.321 billion euros from 3.962 billion, compared with 4.18 billion forecast in Reuters poll.

Oil and gas producers boosted the market, with BP and Royal Dutch Shell gaining 5.6 and 6.5 percent, respectively, and Total up 8.8 percent as U.S. crude oil rallied 5.6 percent.

Volkswagen, Europe's biggest faller, dived 36.4 percent after Porsche took steps to ease a squeeze on short-sellers that had more than quadrupled the stock in days and briefly made it the world's most valuable company. Deutsche Boerse meanwhile said it would cut the weighting of shares in the blue-chip German DAX index.

Porsche stock leapt 38.9 percent.

Analysts said they expected the Fed to cut rates by half a percentage point. Fed fund futures showed a 58 percent probability of rates coming down to 1 per cent and a 42 percent probability of a cut to 0.75 percent.
This is likely to be followed by cuts in Japan, the euro zone and Britain by the end of next week.

Around Europe, Britain's FTSE 100 added 4.9 percent, Germany's DAX was flat, and France's CAC rose 6.6 percent. Topping the FTSE 100, shares in Old Mutual soared 26.9 percent, bouncing back after falling on Tuesday on U.S. economic concerns.

Bayer added 3.5 percent after it stood by its full-year guidance on Wednesday, defying a slump at its plastics and foams unit and citing strong demand for its prescription drugs and its farming pesticides.

EADS rose 8.6 percent after Louis Gallois, chief executive of the French European aerospace group, said on Tuesday its Airbus aircraft unit had not seen a wave of cancellations due to the global financial crisis.

On the downside, Norwegian telecoms group Telenor sank 17.4 percent after reporting a bigger fall than expected in third-quarter core earnings and saying it would buy 60 percent of Indian operator Unitech Wireless for $1.07 billion. Telenor also maintained its full-year outlook..



Asia at a Glance

Asia Market Summary

Japan's Nikkei average climbed 7.7 percent in volatile trade on Wednesday, with exporters such as Honda Motor climbing after the yen weakened on expectations that the Bank of Japan will cut interest rates later this week.

Trade was active but choppy, with the benchmark Nikkei climbing, then paring gains before ending at the day's high.

Japan's central bank is considering cutting rates from an already low 0.5 percent at Friday's policy meeting, a source told Reuters.

If it did pull the trigger, it would join an expected round of rate cuts in coming days as central banks grapple with a darkening global economic outlook.

"The reports about the BOJ's rate cut helped trigger short covering, but that alone is not sufficient reason for investors to keep buying stocks," said Kazuhiro Takahashi, general manager at Daiwa Securities SMBC.

"Even if the BOJ did cut rates, that wouldn't improve economic fundamentals, leaving the market still at the mercy of supply and demand, and currency moves." Some market analysts said it had simply been time for a rebound, given how far the Nikkei had fallen.

The Nikkei's slide to a 26-year low drove its price-to-book ratio below 1 to 0.87 as of Monday, a rare development that means the value of all companies in the index is below the total value of the assets they hold. The ratio had never been below 1 until this month, according to Thomson Reuters data going back to 1991.

The benchmark Nikkei .N225 added 589.98 points to finish at 8,211.90. It has gained 14.6 percent over the past two days. The broader Topix .TOPX jumped 5.9 percent to 830.32.

The Korea Composite Stock Price Index closed down 3.02 percent at 968.97 points, off the peak of 1,078.33 points and moving in a 158-point range between the session's highs and lows, its biggest ever single daily swing.

The Hang Seng index closed up 105.78 points or 0.84 pct at 12,702.07, off a low of 12,333.94 and high of 13,307.42.

Turnover was 59.23 bln hkd.

Australian shares are set to rise sharply on Wednesday, breaking a five-session losing streak, after Wall Street shares surged as part of a worldwide equities bounce.

December share price index futures rose 242 points in after-hours trade to 4,044 -- a 249.4-point premium to the underlying index, which eased 0.4 percent on Tuesday to a fresh four-year closing low.

St. George Bank, which has agreed a takeover by Westpac Banking Corp, releases its full-year results, while drinks group Foster's holds its annual meeting.

Rallying metals prices could give mining stocks a lift, with the Australian markets top-weighted stock BHP Billiton projected to rise 4.4 percent based on its New York close.

New Zealand benchmark NZ50 index jumped 3.4 percent to 2,778.2 in early trade.
;
The benchmark index of the Bombay Stock Exchange (BSE), the Sensex, closed 36.43 points or 0.4 percent higher at 9,044.51. The S&P CNX Nifty of the National Stock Exchange ended 0.46 percent higher at 2,697.05. The November series futures contracts expire today.

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29-Oct Daily Forex Analysis
by: Forexyard


Technical News

EUR/USD
The pair initiated a bullish correction yesterday that seems to have more steam in it. A bullish cross on the daily chart's Slow Stochastic suggests that the rising trend may reach the 1.3000 level. Going long appears to be the right choice today.


GBP/USD
The pair seems to be on its way back up as it gain over 600 pips in the last 24 hours. Currently the 1.6200 level appears to be the new psychological level, and a breach of it may mark the validation of the bullish move.


USD/JPY
It seems that the pair has limited its bullish correction after testing the 100.00 level, and currently, as a bearish cross took place on the 4 hour chart' Slow Stochastic, the resumption of the bearish trend looks imminent. Going short with tight stops might be the right strategy today.


USD/CHF
The pair has been range trading with high volatility over the past few days, and failed to commit a significant breach. However now, a doji formation on the 4 hour chart is implying that a sharp movement is forthcoming, yet the direction seems unclear. Traders should stay out of that one today.


The Wild Card

Crude Oil
After a long period of exclusive bearish trends, Crude Oil prices are giving bullish signals. A bullish cross on both the daily and the 1-hour chart's Slow Stochastic indicates that the bullish orientation is quite strong. This might be a good opportunity for forex traders to enter the trend at a very early stage.


Economic News

USD

U.S. Federal Funds Rate on Tap
Despite a relatively negative news day from United States, U.S. stocks surged more than 10% yesterday, capping a worldwide rally in equity markets, as investors snapped up shares that had plunged during the worst October on record. After yesterday, the USD fell against the EUR for the first time in 7 days, pushing the oft-traded currency pair to 1.2784. The Dollar experienced similar behavior against the Pound and Swiss Franc. The USD did see bullishness as well as it gained over 500 points against the JPY and closed at 98.48.

The most influential economic data coming from the U.S. yesterday was the consumer confidence. The Conference Board's U.S. consumer confidence index fell to an all-time low in October to 38.0 from an upwardly revised 61.4 in September. Lynn Franco, Director of the Conference Board Consumer Research Center stated that the impact of the financial crisis over the last several weeks has clearly taken a toll on consumers' confidence. The decline in this Index is the 3rd largest in the history of the series, and the lowest reading on record. In assessing current conditions, consumers rated the labor market and business conditions much less favorably, suggesting that the 4th quarter is off to a weaker start than the 3rd quarter.

Looking ahead, consumers are extremely pessimistic, and a significantly larger proportion than last month foresees business and labor market conditions worsening. Investors put aside any fears they may have of a deep worldwide recession even after U.S. consumer confidence fell to an all-time low in October.

As for today, a batch of data is expected from the U.S. economy. These figures are expected to set the tone for the USD's pairs and crosses. Special attention should be given to the U.S. Federal Reserve which is expected to cut interest rates by 0.50%. Traders pay close attention to this figure as it has a strong correlation with the value of the U.S. Dollar. If rates are cut, an increase in the amount of USD in circulation will weaken the Dollar. If rates are increased, the exact opposite happens. Dollars are taken out of the economy to help contain inflation and strengthen the value of the USD. Also today, the Core Durable Goods Orders is scheduled which should also have an impact on the market because if it delivers unfavorable figures, it will validate a problematic U.S. market, and the USD is likely to weaken further as a result.


EUR

EUR's Next Big Move May be Positive for a Change
The EUR finished yesterday's trading session with mixed results versus the major currencies. The 15-nation currency saw gains versus the greenback for most of the day and closed at 1.2784. Versus the GBP, the Euro-Zone currency range-traded throughout most of the day, as most of the market movement from yesterday was focused on the greenback. In addition, yesterday was a slow news day in Europe as there was only one economic indicator published.

The GfK Group's Consumer Confidence indicator unexpectedly improved in October. The results from this survey showed that consumers are a little more confident about their situation despite growing fears of a recession. The rise can be accounted for mainly by the steep upward trend in income expectations. The prospects of the positive trend continuing into the following months look good. However, this is contingent on consumer confidence and the stability of the coming reforms in political terms, and that there is no additional financial burden on consumers. Also, if Crude Oil prices rise drastically, this would certainly have a dampening effect on the consumer climate.

Only one data release from the Euro-Zone is expected today, as the German Prelim CPI will be announced during early trading sessions. A rising trend will have a positive effect on the nation's currency. Traders should pay close attention to the response of equity markets to determine how to continue with their EUR positions.


JPY

Yen Receives Relief from Potential BoJ Interest Rate Cut
Two days ago the Yen stood at a 13-year high against the Dollar, but yesterday the JPY dropped against all of its major currency rivals. The JPY fell 5.2% against the USD and closed around 97.00, as the rally in equities sparked a tentative recovery in risk appetite.

A report was leaked by a Japanese newspaper late in the trading day that the BOJ is considering an Interest Rate cut this week. A Rate cut could help to stimulate the sluggish Japanese economy and also to send the JPY lower. The government feels the JPY is overvalued and threatens Japanese exports.

Contrary to this report, on Monday, a BOJ deputy governor made a statement that the BOJ was unlikely to lower Interest Rates. The BOJ Interest Rate currently stands at a relatively low. A reduction in Interest Rates will be on the table when the BOJ's policy board meets on Friday.

There will be one data release from Japan today as the Manufacturing PMI will be announced during late trading. A rising trend may have a positive effect on the nation's currency. Traders should pay close attention to the response of equity markets to the rising Dollar to determine how to continue with JPY positions.


OIL

Oil Snaps Two Day Losing Streak
The price of Crude Oil jumped almost $2 yesterday, snapping a two day losing streak. Further forecasts for Crude prices are predicted to fall as global demand wanes amid the economic slowdown. Crude has fallen from a high of $145 in July to yesterday's closing price of $64.46.

Traders will be looking to U.S. Crude Oil Inventories to be released today. The report monitors the number of barrels of Crude Oil held in inventory by U.S. Oil firms. Inventories are expected to be higher across the board.

Traders may look for a continuation of falling Crude prices, potentially reaching into the $55-$60 range before the weeks end.

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Oct-29 Market Commentary and Technical Levels

Wed, 29th of October, 2008
By Setyo Wibowo (analyst@fxinstructor.com)

EURUSD Outlook
The EURUSD made a significant upside correction yesterday (It’s about time huh? :-) ). The pair topped at 1.2835 and closed at 1.2816. Early today in Asian session the pair was traded softly lower. CCI about to cross -100 line up on daily chart suggesting a potential further upside movement. However, although further upside momentum might continue today, I think we should see any upside movement as a consolidation/correction and long trade positions are not recommended at this phase. Be patient. The major trend is still bearish. Immediate resistance is seen at 1.3006 followed by 1.3200 (23.6% Fibonacci retracement from 1.6038 to 1.2333). Initial support at 1.2690 followed by 1.2590.

EURUSD Daily Supports and Resistances:

  • S1= 1.2485
  • S2= 1.2154
  • S3= 1.1979
  • R1= 1.2991
  • R2= 1.3166
  • R3= 1.3497


GBPUSD Outlook
The GBPUSD also made a significant upside correction yesterday. The pair topped at 1.6037 and closed at 1.6021. We need this upside correction as CCI already In extreme oversold area on monthly chart. We also should see this current upside momentum as consolidation/correction move. CCI about to cross -100 line up on daily chart, suggesting a potential upside momentum. However, long trade positions are not recommended at this phase. Be patient. Immediate resistance is seen at 1.6141 followed by 1.6408.

GBPUSD Daily Supports and Resistances:

  • S1= 1.5601
  • S2= 1.5182
  • S3= 1.4964
  • R1= 1.6238
  • R2= 1.6456
  • R3= 1.6875


USDJPY Outlook
After an indecisive movement on Monday, the USDJPY was corrected higher yesterday. The pair made a huge movement of more than 700 pips, topped at 99.68 and closed at 98.15. However the pair was traded lower early today in Asian session around 97.30 at the time I wrote this comment. My model is mixed but still with downside bias as I see this bullish movement only as a correction of the major bearish trend. Be patient at this phase. Immediate resistance is seen at 99.68 (yesterday’s high). Initial support at 96.80 followed by 95.80. CCI in overbought area and heading down on 4h chart suggesting downside pressures.

USDJPY Daily Supports and Resistances:

  • S1= 93.96
  • S2= 89.78
  • S3= 86.92
  • R1= 101.00
  • R2= 103.86
  • R3= 108.04


USDCHF Outlook
The USDCHF continued it’s soft lower correction yesterday. The pair bottomed at 1.1508 and closed at 1.1526. My model is mixed with neutral bias, but we are still in bullish outlook in longer term. Immediate support is seen at 1.1480 followed by 1.1375. Initial resistance at 1.1655. CCI just cross 100 line down on daily chart suggesting downside pressures.

USDCHF Daily Supports and Resistances:

  • S1= 1.1471
  • S2= 1.1416
  • S3= 1.1324
  • R1= 1.1618
  • R2= 1.1710
  • R3= 1.1765

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Tuesday, October 28, 2008
ForexYard Indicator Report
by: Forexyard


Be Prepared! U.S. Federal Funds Rate Expected Tomorrow at 18:15 GMT

We at ForexYard encourage our customers to get involved in the most intense market events. As such, we think you should know that the U.S. Federal Funds Rate figure is expected tomorrow, October 29th, 18:15 (GMT), and you need to be prepared. Market events like this one tend to create either big changes to current trends or push current trends even further. Generally, the Majors are the ones most affected by market events in general but Crude Oil, Gold prices, and even the price of Silver can change dramatically in the seconds after such a publication. For more information about the U.S. Federal Funds Rate, please read below.


What is the U.S. Federal Funds Rate?

The U.S. Federal Funds Rate, or Interest Rates, is the rate at which banks lend balances held at the Federal Reserve to other banks overnight. This figure is released 8 times each year. It is important because short-term Interest Rates are the leading factor in determining the value of a currency. In fact, most other economic indicators are used by traders to speculate about the future movement of these Interest Rates. This figure is decided on by the members of the Federal Open Market Committee (FOMC) who vote on where to set a "target rate," because the actual rate is set by the open market. It is a mechanism used by the Federal Reserve to regulate the supply of money in the U.S. economy and has a direct impact on supply and demand for the USD.

According to the needs of the U.S. economy, the FOMC will elect to increase, decrease, or leave the rate unchanged. Traders pay close attention to this figure as it has a strong correlation with the value of the U.S. Dollar. If rates are cut, there will be an increase in the amount of USD in circulation making them grow weaker in value. If rates are increased, the exact opposite happens. Dollars are taken out of the economy to help contain inflation and strengthen the value of the USD.


If the Federal Funds Rate is Decreased

At present, market analysts are forecasting the Federal Funds Rate to be cut to 1.00% from its current level of 1.50%. If this happens it would indicate that the Fed is going to start buying securities. This will likely have the effect of lowering the value of the USD against its major currency pairs as traders will start selling USD during its devaluation.

By decreasing the Interest Rates, it stimulates U.S. economic growth by making it cheaper to get a mortgage or buy a car. This entices investors to put more money towards capital in the local economy. However, this change in the Interest Rate is always approached with caution. If rates are cut too far, the rapidly growing economy will force a sharp increase to the rate of inflation. As inflation raises, the cost of goods and services also rise and make the value of the dollar even weaker. When this happens it usually warrants a subsequent increase to the Federal Funds Rate.

Ultimately the Fed is trying to find the target interest rate that balances these factors. Traders should expect a call by the Fed to cut the present rates as the recession is weakening the buying power of most Americans and action must be taken to stave off further disaster.


If the Federal Funds Rate is Increased

Although the current forecast is predicting the Fed to cut Interest Rates, there is the possibility of an increase in this figure. If the Fed decides to enact such an increase in Interest Rates, it will begin selling securities. This will limit the amount of U.S. currency in the market. If the Federal Funds Rate will indeed be increased, the upward momentum of the USD will take off as its value becomes much stronger versus its currency rivals.

This result is less likely for October 2008 seeing as such a move has the potential to cause a recession. Since the U.S. economy is currently witnessing a recessionary move, an action such as this is not likely. It is far more possible that the Fed will indeed issue an order to cut current rates than it would be for the Fed to issue an increase in the Federal Funds Rate at this time.

The best way to capture profits from the announcement of these rates is to be aware of their impact on the strength of the USD and trade accordingly.

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28-Oct - World Daily Markets Briefing
by: ADVFN Newsdesk


Forex

FOREX-Yen retreats broadly as global stocks rebound

LONDON - The yen retreated from recent 13-year highs against the dollar on Tuesday as stock markets rebounded and risk aversion ebbed, with the possibility of official intervention also weighing on the
currency.

In tandem with equity gains the yen dropped across the board, particularly against currencies such as the euro and the high-yielding Australian dollar which have taken a battering recently as investors' wariness
of risk reached extreme levels.

"The share gains have helped some of the removal of negative sentiment in forex markets," Investec economist David Page said. "This has led to some retracement in the yen against the dollar as well
as a wider basket of currencies".

The yen was further pressured by a Kyodo New s Agency report that the Bank of Japan is set to cut Japan's economic growth estimate for the 2008/09 fiscal year to 0.3 percent from the current 1.2 percent.

At 1230 GMT, the dollar was up 2.7 percent against the yen at 95.35, moving away from a 13-year low of 90.90 yen struck on Friday, according to Reuters data. The euro was up 3.3 percent at 119.72 yen. The euro struck a 6-1/2 year low of 113.61 yen on Monday.

The single currency also rose 0.7 percent against the dollar to $1.2549. Among the higher yielding currencies that have been pummelled recently, the pound rose 1.2 percent to $1.5721 and the Australian dollar jumped 3.8 percent to $0.6251.

The Reserve Bank of Australia intervened in Asian trade for a third day to prop u p the Australian currency, which has lost more than 35 percent against the U.S. dollar since peaking in July.

The respite for stock markets and the yen's fall, however, were seen as a temporary pause from recent price action as the spectre of a prolonged global recession was expected to keep investors in risk-averse mode.

"There's no sense that the underlying trend of dollar strength and yen strength is set to change," said Daragh Maher, deputy head of Calyon global foreign exchange research in London. Traders said the yen is likely to test a 13-year peak against the dollar sooner or later if Japanese investors, who still have lots of overseas assets, decide to dump them and repatriate their proceeds.

Distressed stock market prices and the yen's rise succeeded in getting Group of Seven economic powers to warn against excessive yen volatility on Mon day. This was seen as opening the way for central banks to intervene if necessary.

But this looked less likely after French Economy Minister Christine Lagarde said on Monday any intervention on the yen would be a purely Bank of Japan undertaking, a move which many believe would be ineffective.

"Until I actually see the Bank of Japan intervene then I am afraid the trend is intact and I don't see them in until we test their resolve (which I think we will at 90.00) at some point," IDEAGlobal senior strategist Maurice Pomery said in a note to clients.

Meanwhile, analysts believe attention will soon turn back to the prospest that global central banks will again get together to cut interest rates in a bid to stave off a deep global recession. Bank of England Deputy Governor John Gieve said on Tuesday that international autho rities need to be ready to act again if necessary.

Meanwhile, the U.S. Federal Reserve is seen cutting rates at its two-day meeting starting on Tuesday, while European Central Bank President Jean-Claude Trichet on Monday said the bank could cut rates at its policy meeting next week.


US Stocks at a Glance

US STOCKS-Market extends gains, Dow jumps 4 pct

NEW YORK - U.S. stocks extended gains on Tuesday and the Dow briefly rose more than 4 percent, as investors snapped up beaten-down shares. Hopes of an end to Boeing Co's strike sent the planemaker's stock up more than 9 percent.

The Dow's underpinning also came from a rebound in shares of energy companies, with Exxon Mobil up more than 5 percent after rival BP posted a record profit.

The Dow Jones industrial average .DJI was up 320.66 points, or 3.92 percent, at 8,496.43. The Standard & Poor's 500 Index was up 32.77 points, or 3.86 percent, at 881.69. The Nasdaq Composite Index was up 56.15 points, or 3.73 percent, at 1,562.05.

Stocks were higher after a report said U.S. consumer confidence plunged to a record low in October.



Europe share

Europe shares rise early on fresh VW surge, BP

LONDON - European shares rose in early trade on Tuesday to break a five-day losing streak, helped by a surge in Volkswagen and sharp gains in heavyweight oil group BP after quarterly profits jumped.

At 0955 GMT, the FTSEurofirst 300 index of leading European shares was up 2.1 percent at 833.00 points, and had been as high as 839.86. The index has lost 21.6 percent in October, hurt by a credit crisis and recession worries.

Volkswagen was up 64 percent, following its 146 percent surge on Monday. Short sellers piled into the stock to sew up their speculative positions after Porsche bought up nearly all VW's remaining free float.

BP rose 4.2 percent after it reported a 148 percent rise in third-quarter replacement cost profit, at $1 0.03 billion, boosted by higher oil prices.

Total, ENI, and Royal Dutch Shell were up between 0.3 and 3.1 percent. "It's no real surprise that bargain-hunters are coming into these markets, despite the fact that expectations for the economy are tumbling and the outlook on the corporate front is gloomy," said Henk Potts, strategist at Barclays stockbrokers.

"There's too much bad news priced into these markets. Long-term investors can look through the dark clouds ... and can see the cheap valuations."

BG Group was up 2 percent after launching a A$5.6 billion ($3.4 billion) friendly takeover bid for Australia's Queensland Gas Co Ltd(QGC) as it tries to secure gas to boost its position in Asia's lucrative liquefied natural gasmarket.

Most miners were hi gher as metals prices in London and Shanghai recovered after early falls, bouncing off lows on the back of losses by the dollar ahead of a U.S. central bank meeting later in the day.

London Metal Exchange copper for delivery in three months rose 0.75 percent to $4,030, having dipped almost 5 percent earlier. BHP Billiton, Rio Tinto, and Xstrata were up between 3.3 and 6.8 percent.

But Eurasian Natural Resources Corp. and Kazakhmys were down 5.9 and 4 percent respectively after the Kazakh government said the two companies would reduce output due to the global economic turmoil.

Later in the session, the U.S. Federal Reserve starts a two-day meeting expected to cut the fed funds rate -- now at 1.50 percent -- by at least a further 50 basis points. "That should set the tone for the Bank of England and the ECB to cut rates," said Potts of Barclays. "The inflation picture has improved."

Britain's FTSE 100 was up 2.1 percent, Germany's DAX was up 9 percent, boosted by Volkwagen, and France's CAC-40 was up 0.3 percent. Aviva surged 10.8 percent after the insurer said it had had no discussions with the UK government about capital support and reported a 12 percent rise in sales for the nine months to September.

Its rival Aegon was up 0.9 percent after saying that the Dutch government would provide 3 billion euros capital. The company said it will scrap its final 2008 dividend, as it reported a third-quarter loss of 350 million euros.

Terms of the injection are nearly identical to the deal between the Dutch government and finan cial group ING announced last week. ING was one of the biggest losers in the index on Tuesday, down 8.9 percent, after Fitch cut its outlook to "negative" from "stable".

Other banks that fell included Deutsche Postbank, down 9.7 percent after JP Morgan slashed its price target to 16.5 euros from 52.3 euros while maintaining a "neutral" rating.

French bank Societe Generale was down 2.2 percent despite moving to reassure investors after a sharp fall in its share price on Monday, saying it was sticking by its profit forecast and had no bad surprises in its market operations.

Spain's biggest bank, Santander, was up 2 percent after posting a 5.5 percent rise in net profit for the first nine months to September, underpinned by robust recurrent earnings from its core retail b anking business.



Asia at a Glance

Asian market Summary

The Nikkei .N225 gained 459.02 points to 7,621.92. It earlier fell as much as 2.3 percent to 6,994.90, its lowest since 1982.

It is down 32 percent so far this month and has lost half its value since the start of this year.

The broader Topix rose 5 percent to 784.03 after falling 3 percent at one stage.

Trade was active on the Tokyo exchange's first section, with 3.2 billion shares changing hands, compared with last week's daily average of 2.4 billion.

The Korea Composite Stock Price Index ended at 999.16 points, off the day's peak of 1,012.73 points but well up from the morning low of 901.49 points.

The KOSPI has fallen 31 percent on the month to be down 47 percent on the year as investors ignored repeated financial support moves from the South Korean government and a total one percentage point cut in domestic interest rates during October.

"Despite the ongoing concerns about economies and such, investors are slowly getting the idea that shares at the current levels are affordable. Also gains in regional markets helped," said Kim Seong-joo, a market analyst at Daewoo Securities.

The benchmark Shanghai Composite Index closed up 48.47 points or 2.81 pct at 1,771.82, bouncing back from a 25-month intra-day low of 1,664.93 points in morning trading. The index had lost 12.7 pct in the previous five trading days.

Turnover rose to 39.75 bln yuan from 32.21 bln yuan yesterday.

The Shanghai A-share Index was up 51.04 points or 2.82 pct at 1,861.47, while the Shenzhen A-share Index rose 11.08 points or 2.23 pct to 508.42.

The Hang Seng index closed up 1,580.45 points or 14.35 pct at 12,596.29, off a low of 11,133.94. It marked the biggest one-day percentage gain for the index since Oct 29, 1997, when it surged 18.82 pct.

Turnover was 66.05 bln hkd.

TAIPEI - Share prices closed firmer as purchases by government-related funds and some bargain-hunting helped the market recover from steep early losses driven by margin calls and recession fears.

The weighted index closed up 33.10 points or 0.76 pct at 4,399.97, off a low of 4,110.09 and high of 4,425.90.

Turnover was 71.99 bln twd.

Today's intraday low was the lowest level for the index since the 4,108.67 recorded on May 2, 2003, when the region was gripped by SARS outbreak.

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28-Oct Daily Forex Analysis
by: Forexyard


Technical News


EUR/USD
This pair is still in the midst of a steady downtrend, however the 4 hour and the daily chart's RSI has peaked at the over-sold zone, suggesting that a bullish correction move might be quite imminent. As for the short term, a sharp bullish move has already taken place on the hourly chart and seems to have more steam in it. Going long with tight stops might be the right strategy for the nearest timeframe.


GBP/USD
After the recent intensive downtrend, the cable appears to be consolidating at the 1.5650 level. In the shorter time frame a bullish cross on the 4 hour indicates that there might be a small correction before the larger bearish move resumes. Selling on highs appears to be preferable today.


USD/JPY
On the hourlies, the pair is in the beginning of an uptrend correction initiated at 92.70. The RSI and Momentum are still positively sloped indicating that there is still steam left in this bullish move. The daily chart's oscillators show that a negative breach is quite unlikely, and the 4 hour charts are also showing a beginning of a mild bullish momentum. Going long might be a preferable strategy.


USD/CHF
The volatile trading continues without a distinct breaking direction. The hourly chart is giving mixed signals and is mostly floating in neutral territory. The dailies however, are showing a slight bullish momentum. The daily chart's Slow Stochastic is positively sloped and the RSI also confirms that the direction is indeed up.


The Wild Card


Gold
This commodity has been trying to massively correct the intensive bearish move, and is now trading around the 750 level. The sharp bullish channel is in a high spot at the moment and together with a positive slope of the hourly chart's Slow Stochastic it provides forex investors quite a good potential for long positions.



Economic News


USD

Dollar Continues to Break Records against the EUR
The USD continues to strengthen on all fronts as investors are viewing the U.S. economy on much stronger footing with the ability to better handle the impending global recession then most economies of the western world.

The Dollar continues to break new record highs against the EUR on a daily basis, and yesterday the EUR/USD pair reached as low as the 1.2330 level. Similar activity was observed against the GBP as well, mainly because the European nations are currently considered to be the most vulnerable countries to a prolonged recession, and investors around the globe have less confidence in the region's ability to handle a global slowdown.

In addition to the strong bullish trend the USD is experiencing lately, another support came in yesterday as the U.S. New Home Sales data was released, providing better-than-expected figures. The indicator showed 464K new single-family homes were sold during September. The importance of this result is that it was the first time in four months more houses were sold as opposed to the previous month. Previously, the deteriorating condition of the U.S. housing sector was the first trigger many analysts used in order to prove that the U.S economy is headed towards recession. Yesterday's figures came as a positive surprise that the U.S economy might be stabilizing and further strengthened the greenback.

As for future trading, today the U.S. Consumer Confidence survey is scheduled for 14:00 GMT, and is expected to provide mediocre results. Tomorrow the Federal Reserve is widely expected to cut interest rates by 0.5%. What this means is that although in the long term the USD is expected to appreciate, the next few days it might embark on a moderate bearish correction for the USD against its major pairs and crosses. Traders are advised to keep a close eye on the following couple of days as fantastic opportunities for short-term profits might be observed.


EUR

Another Rate Cut in Store for the EUR?
The EUR seems to be stabilizing against most of the major currencies except for the USD. The strong downtrend of the EUR vs. the JPY and CHF has halted since the beginning of the trading week, yet against the USD the EUR saw another bearish session.

After wide spread rumors claiming that the European Central Bank (ECB) is planning to cut interest rates, the ECB President, Jean Claude Trichet, delivered a speech yesterday in Madrid, reinforcing the suspicions by saying that the ECB will possibly cut Euro-Zone interest rates at its next meeting, scheduled for November 6th. However, he avoided revealing the size of the planned cut.

Most people will probably tell you that this is another milestone in the EUR's bearish journey, but might you consider a different point of view? Until now, investors around the world were quite united on the assumption that an interest rate cut is just a matter of time in the Euro-Zone, and therefore avoided investing in this region and caused the latest downtrend for the EUR. But how will they act now that it has been partially confirmed that the cut will indeed take place? Some investors might see it as an excellent opportunity to make profits from the weak currency, so don't be surprised if a bullish correction will take place in the next couple of weeks.

Meanwhile, today's leading indicator will be the German Consumer Climate survey, which is expected to describe a rather gloomy picture for the Euro-Zone's strongest economy. Traders should expect another session of high volatility with still a slight potential for bearish movements.


JPY

JPY Post Sharp Drops from Unwinding Carry Trades
After a week of tremendous bullish trends, the Japanese leadership is giving worrying signals to the JPY's overvaluation. Yesterday French Finance Minister, Christine Lagarde, said that the Japanese administration is considering getting actively involved in the foreign exchange market for the first time in four years, and that the Bank of Japan may begin selling Yen on the open market in the near future.

The unwinding of carry trades that have traditionally used large amounts of leverage have pushed the JPY higher to levels not seen before. As investors buy back JPY that they originally borrowed in, the JPY has seen abnormal gains. The Japanese government faces the difficult task of estimating how much more deleveraging exists in the market and when to begin selling the JPY in order to lower the exchange rate.

There are real concerns in Japan that the exporting sector will be sharply damaged by a stronger JPY, and considering the already poor outlook of the Japanese economy, such reaction could be lethal. It seems that Japan won't accept the current value of the JPY, and will act to bring it back to a more comfortable level. Traders should take very seriously any statement on that issue and follow these developments very carefully, as they could generate a new trend in the market.


OIL

Crude Prices Keep Dropping
Crude Oil is retaining it low price, and yesterday it made an almost 17-month low falling to $61.30 a barrel.

Speculations that fuel demand is on the verge of a deep cut continue pushing the price of Crude Oil down, much below analysts' expectations. Who now remembers that only six month ago Crude Oil prices were forecasted to rise to the $200 level?

Even the OPEC announcement that it will reduce the production of Oil by 15% failed to create any divergence in the current bearish trend. It currently seems that as long as equity markets are dropping on a daily basis, the price of Crude Oil will be consistently damaged.

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Oct-28 Market Commentary and Technical Levels

Tue, 28th of October, 2008
By Setyo Wibowo (analyst@fxinstructor.com)

EURUSD Outlook
Yesterday EURUSD hit my short target at 1.2380, even further bottomed at 1.2333, but closed higher at 1.2461. The bias remains bearish. My model is short targeting 1.2280 then 1.2138. Immediate resistance is seen at 1.2495. CCI just cross -100 line down on hourly chart suggesting a potential bearish view.

EURUSD Daily Supports and Resistances:

  • S1= 1.2301
  • S2= 1.2141
  • S3= 1.1949
  • R1= 1.2653
  • R2= 1.2845
  • R3= 1.3005


GBPUSD Outlook
Yesterday the GBPUSD continued it’s bearish scenario. The pair bottomed at 1.5275, closed higher at 1.5534. Early today in Asian session the pair continued it’s bearish momentum, traded around 1.5415 at the time I wrote this comment. My model remains short targeting 1.5262. CCI about to cross -100 line down on 4h chart suggesting a potential downside pressures.

GBPUSD Daily Supports and Resistances:

  • S1= 1.5247
  • S2= 1.4960
  • S3= 1.4645
  • R1= 1.5849
  • R2= 1.6164
  • R3= 1.6451


USDJPY Outlook
The USDJPY made indecisive movement yesterday. The pair opened and closed at almost the same prive (93.22 and 93.23), formed a Doji formation on daily chart. My model remains short and still targeting 90.89. Immediate resistance is seen at 94.15. CCI in neutral area on 4h chart.

USDJPY Daily Supports and Resistances:

  • S1= 92.02
  • S2= 90.81
  • S3= 89.58
  • R1= 94.46
  • R2= 95.69
  • R3= 96.90


USDCHF Outlook
The USDCHF was corrected lower yesterday. The pair bottomed at 1.1515 and closed at 1.1566. However we are still in bullish scenario. There might be some downside corrections as daily CCI is about to cross 100 line down, but the pair is still in bullish scenario and any downside movement should be seen as consolidation. My model remains long targeting 1.1855. Immediate support is seen at 1.1559 followed by 1.1515 (yesterday’s low).

USDCHF Daily Supports and Resistances:

  • S1= 1.1483
  • S2= 1.1401
  • S3= 1.1287
  • R1= 1.1679
  • R2= 1.1793
  • R3= 1.1875

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Monday, October 27, 2008
World Daily Markets Briefing
by: ADVFN Newsdesk


US Stocks at a Glance

US STOCKS-Market drops on recession angst, tech fears

NEW YORK - U.S. stocks fell on Monday as investors fretted about the likelihood of a sharp economic downturn and the fallout on corporate profits.

Top drags included shares of technology bellwethers such as Microsoft Corp, down nearly 4 percent, amid worries about the toll of the credit crisis on tech spending.

The Wall Street Journal reported that defaults on tech financings -- loans that allow companies to buy computers, software and other products, have spiked this year.

Business software maker Oracle Corp fell 4 percent, while BlackBerry devices maker Research In Motion shed more than 3 percent. "The recession is taking more of a global front than people initially
expected," said Cleveland Rueckert, market analyst at Birinyi Associates Inc in Stamford, Conne cticut.

"There's a loss of confidence in stocks. A lot of the capital in stocks is moving around ... there's a lot of liquidation and hedge funds are forced to sell stocks."

The Dow Jones industrial average fell 86.10 points, or 1.03 percent, to 8,292.85. The Standard & Poor's 500 Index shed 13.18 points, or 1.50 percent, to 863.59. The Nasdaq Composite Index dropped 25.86 points, or 1.67 percent, to 1,526.17.

Investors also sold off shares of energy companies on fears that a global recession will hurt energy demand. Shares of Exxon Mobil declined about 2 percent.

U.S. stocks had briefly turned higher following a government report that showed a surprise increase in September new home sales. For more see.
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Another positive spur came from comments by European Central Bank President Jean-Claude Trichet that appeared to open the door to another ECB interest rate cut. He said an ECB rate cut was a possibility, not a certainty, at the next policy meeting.

But the boost from the data and Trichet's comments proved short-lived. Microsoft shares fell to $21.17 on Nasdaq, as shares of RIM declined to $43.42. Tech services giant International Business Machines Corp, off nearly 2 percent, was a top drag on the Dow.

Shares of General Motors slid 7 percent to $5.54 on the New York Stock Exchange as investors fretted about the car makers's outlook after people familiar with the talks said that GM and Chrysler LLC's owners, Cerberus Capital Management , were discussing a merger.

The diminishing appetite for risk is driving panicked investors, including hedge funds and mutual funds, to liquidate equity holdings en masse, threatening to make October the worst month ever for the benchmark Standard & Poor's 500 index in the post-World War Two period.

In Asia, Hong Kong shares on Monday plunged 12.7 percent, and Japan's Nikkei average slid more than 6 percent to their lowest close in 26 years. In deal news, rural U.S. telephone service provider CenturyTel agreed to buy Embarq for $5.8 billion.. Shares of Embarq jumped 8 percent to $32.06.



Forex

FOREX-Yen stands firm despite G7, more RBA buying seen

LONDON - The yen's rally was firmly intact on Monday despite the G7 singling out excessive volatility in the Japanese currency, while the dollar hit a two-year high versus the euro as investors shed exposure to
risk.

The yen was hovering below 13-year peaks against the dollar but hit its highest since May 2002 against the euro. Finance authorities of the Group of Seven leading countries issued an unscheduled statement saying it was concerned about recent excessive volatility in the yen and would continue to monitor markets closely, and cooperate as appropriate , raising the spectre of coordinated currency intervention.

The yen has surged sharply as investors unloaded carry trades, which use the low-yielding yen to buy everything from higher-yielding currencies to stocks and commodities. Such trades have collapsed in the past few weeks as market players have been forced to sell many assets to raise cash.

"Banks are cutting back on lending, that has consequences for emerging markets and asset prices generally. I can't see anything on the immediate horizon to break the current cycle," said Derek Halpenny, European head of FX research at BTM-UFJ in London.

"That's the real problem for the authorities," he added. The yen has struck a 13-year peak against the dollar, a six-year peak against the euro and many other milestones in its roughly 20 percent surge on a trade-weighted basis this month.

Japanese finance minister Shoichi Nakagawa said on Monday that he was watching currencies with "great interest". But some analysts said that while the possibility of concerted currency intervention was closer, it may still take time for authorities to act.

"It (G7 statement) was hardly a warning shot, it was more like saying we are aware of recent volatility ... we're not there yet for intervention," said Geoffrey Yu, currency strategist at UBS in London.

While not ruling out intervention by Japanese authorities if the dollar sinks to 80-85 yen sharply, "the likelihood is that everything will be done through the G7 framework, that's what the U.S. Treasury wants," he added.

At 1200 GMT, the dollar was down 1.1 percent against the yen from late U.S. trade last week to 93.21 yen, having risen near to 94.50 yen after the G7 warning. On Friday the U.S. currency slid to a 13-year low of 90.90, according to Reuters data.

The euro was down 2.3 percent at 116.20 ye n, after hitting a near 6-1/2 year low of 113.64 yen. Against the dollar, the euro dropped more than 2 percent to a near 2-1/2 year low of $1.2335 . The dollar has also soared against most other currencies, reaching a six-year high against the pound, as investors have unwound positions in many markets and boosted cash holdings in the greenback for investor redemptions.

Meanwhile, the Reserve Bank of Australia continued to intervene unilaterally in the currency market, buying Aussie dollar for U.S. dollar in Europe on Monday, traders said.

The RBA confirmed it had intervened in foreign exchange markets on Friday and in Asian trade earlier in the global session to stabilise the flagging Australian currency. The Australian dollar shed 2.9 percent to $0.6052, back near a six-year low. Against the yen, the Aussie fell 3.9 percent to 56.43 yen after sinking to
55.11 yen on Friday -- the lowest since it was allowed to trade freely.

Reaction was muted to data showing German corporate sentiment fell more than expected in October to its lowest level since May 2003. The Munich-based Ifo economic research institute said on Monday that its business climate index fell to 90.2 from 92.9 in September.



Europe share

Europe shares fall sharply on deep recession fears

LONDON - European shares fell more than 4 percent on Monday as global recession fears hit banks and energy shares, with Volkswagen a rare exception as Porsche disclosed its increased stake in the carmaker.

By 1133 GMT the FTSEurofirst 300 index of top European shares was down 4.3 percent at 794.28 points, adding to Friday's decline of 4.9 percent, although it was off a session low of 784.29. "It is all following from the panic seen in the Far East.

The whole thing has gone well beyond what is deemed as sensible. There is probably a lot of distressed selling, hedge funds or mutual funds having to meet redemptions," said Mike Lenhoff, strategist at Brewin Dolphin.

"The market seems to be discounting a severe recession and is focusing on the prospect of a downturn which is longer and deeper than expected," added Lenhoff.

Banks took the most points off the European index. HSBC , BNP Paribas, Societe Generale and Deutsche Bank were down between 8.9 and 15.7 percent. "Financials are down a lot. I don't think there will be much let up until we are basically well into the recession and investors feel there is going to be an end to it ," added Lenhoff.
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Energy shares were also lower. Crude fell by 3 percent as an emergency production cut by OPEC was shrugged off by traders anxious about the onset of a deep recession. BG Group, BP, Royal Dutch Shell and Total were down between 6.6-10 percent.

Pharmaceutical stocks were also in the doldrums as European drugmaker Merck trimmed its full-year operating margin target. Roche, Sanofi-Aventis and AstraZeneca were down between 1.7-4.9 percent.

Volkswagen jumped 86.6 percent after sports carmaker Porsche said on Sunday it had raised its VW stake to 42.6 percent of votes and controlled a further 31.5 percent via cash-settled options. Analysts said the news would intensify a short squeeze in VW shares.

British bank HBOS also bucked the downtrend, up 2.5 percent. British Prime Minister Gordon Brown said in the Financial Times over the weekend the proposed merger between LloydsTSB and HBOS was the right step to save the bank as no other bidders had come forward.

National Bank of Greece gained 8 percent. Greece's big banks, which have agreed to a 28 billion euro government rescue plan, said the scheme will enable them to get state funding if and when needed and be on a par with European peers.

Underlining worries on the macroeconomic front, the German Ifo index which measures indications about German business sentiment fell to its lowest level since May 2003 on expectations the export sector will take a big hit from weakened foreign demand.

"The Ifo business expectations were consistent with the view that prospects are not good and that a recession is taking shape," added Lenhoff.

At 1400 GMT U.S. new home sales data will give the latest snapshot of the state of the U.S. housing market. Across Europe, the FTSE 100 index was down 3.8 percent, Germany's DAX slipped 3.2 percent and France's CAC 40 index was 5.3 percent lower.



Asia at a Glance

Asian Market Summary

Japan's Nikkei average slid 6.4 percent on Monday to its lowest close in 26 years, as the yen rose to batter exporters such as Toyota Motor Corp and banks tumbled on concerns they would need to beef up capital.

In its fourth straight negative day, the Nikkei shed 486.18 points to close at 7,162.90, its lowest close since October 1982 -- when Ronald Reagan was the U.S. President and Sony Corp released the CD player.

At one point it fell as far as 7,141.27. The benchmark has lost 36.4 percent so far this month and 53 percent this year. The broader Topix was down 7.4 percent at 746.46.

Shares of Mitsubishi UFJ Financial Group slid after sources said it may need to raise up to $10.8 billion in capital to offset hefty losses on its stock portfolio. Other banks were also looking at securing more capital, newspapers reported.

Asian shares also fell, hurt by the view that central bank policy moves, including a record rate cut in South Korea, were not enough to allay a global recession.

The MSCI index of stocks outside Japan was down 5.8 percent. "It's hard to see where the market will stop. If you consider valuations or any other sort of measure, the current levels are abnormal," said Takashi Ushio, head of investment strategy at Marusan Securities.

Trade was active, with some 3.1 billion shares changing hands on the Tokyo Exchange's first section compared with last week's daily average of 2.1 billion. Declining shares outpaced advancing ones by more than 12 to one.

Among blue-chip exporters, Toyota fell 8.1 percent to 2,940 yen, its lowest close since mid-2003 and Honda slid 8.9 percent to 1,812 yen. Digital camera and copier maker Canon Inc dropped 10.9 percent to 2,375 yen.

After the close, it reported a 26 percent fall in quarterly operating profit and cut its annual outlook to predict its first profit decline in 9 years, hit by sluggish demand for copiers and digital cameras and a stronger yen.

Among banks, Mitsubishi UFJ fell 14.6 percent to 583 yen, while Mizuho lost 14.8 percent to 230,000 yen and Sumitomo Mitsui shed 11.5 percent to 385,000 yen.

Prime Minister Taro Aso said the government would expand a scheme that allows banks access to public funds and also strengthen regulations on the short-selling of shares.

Other steps mentioned include using a state body to buy shares from banks, and extending tax relief on income from stocks and dividends. The measures underscore the difficulties now facing lenders in the world's No.2 economy, which at first appeared to have avoided the credit crisis, allowing them to invest in overseas rivals.

Mizuho Financial Group, Japan's second-largest bank, and third-ranked Sumitomo Mitsui Financial Group are both looking to raise as much as 500 billion yen ($5.4 billion), newspapers said.

Hong Kong shares plunged 12.7 percent in their biggest single-day drop since 1997 on Monday, led by blue-chip heavyweight HSBC, as fears of a global recession hammered Asian financial markets.

The benchmark Hang Seng Index .HSI closed down 1,602.54 points at 11,015.84, its lowest level since mid-2004 and taking its losses so far this year to 60 percent. The index lost as much as 15 percent earlier, its largest one-day decline since 1987.



Commodities

Oil below $64, down on economic gloom

Oil trimmed losses after sinking to a new 17-month low below $62 a barrel on Monday, driven down by investor pessimism about the deteriorating global economic climate and its likely impact on demand for fuel.

U.S. light crude for December was 47 cents lower at $63.68 a barrel by 1409 GMT, after touching a 17-month low of $61.30 a barrel earlier in the session.

London Brent crude was 73 cents lower at $61.32.

Gloom about the world economy has had a greater impact than OPEC's deal on Friday to chop output by 1.5 million barrels per day to try to boost the oil market.

"What OPEC did is constructive, but right now that is beside the point," said Mike Wittner of Societe Generale.

Oil traders were watching for signs the Organization of the Petroleum Exporting Countries would implement its cuts.

Asian oil refiners said on Monday they had yet to receive notice of any curbs on their Gulf crude oil shipments, but most were expecting a 5 percent cut.

Iran's OPEC Governor Mohammad Ali Khatibi has said the group will reduce production further if the cut agreed in Vienna on Friday does not stabilise the market.

Oil prices have fallen by nearly 60 percent since they hit a record high above $147 a barrel in July.

Demand has fallen in the United States, the world's top energy consumer, and in other industrial countries as the credit crisis infects the wider economy and begins to spread to emerging markets.

In China, for example, apparent oil demand rose by just over 2 percent in September, the slowest growth in 10 months.

Investors around the world are trying to find shelter, contributing to heavy losses on Asian and European stock markets, as well as other commodities such as gold and copper.

The volume of open contracts in energy, metals, grains and soft commodities on major U.S. commodity futures markets fell to its lowest since May 2006 in the week to Oct. 21, as the risk of recession has prompted some investors to pull out.

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