Yesterday, U.S. stocks fell, erasing gains that were made since the Fed's Sept. 18th interest-rate cut, which accelerated a sell-off… … in the U.S. currency. The dollar slid even further after comments from senior Chinese officials stirred concerns about China's central bank shifting reserves away from the U.S. currency.

As a result, the USD has been dragged down to its lowest point in 30 years against a
basket of six rivals yesterday.

Meanwhile, the recession of the housing sector is progressing. Following the
downdraft from the housing industry spreading to other sectors, traders increased
wagers that the Fed will lower its benchmark interest rate to 4.25% by the end of
the year. Futures contracts show that the odds of a 0.25% point rate cut at the
central bank's Dec. 11 policy meeting are currently standing at 70%. There are also
a lot of concerns about the health of the U.S. economy in general and the greenback
seems to be losing its status as the major global currency.

Today the most significant news coming out of the US will be the Unemployment
Claims. The figure is expected to be released at 320K, slightly better last month's
mark of 281K. Later, at 15:00 GMT, Fed Chairman Bernanke is scheduled to speak about
the economic outlook during his testimony in Washington DC. Bernanke is known for
dropping clues during his speeches, as it is the FOMC's tenet to keep the public
aware of their monetary policy before interest rates are changed. Heavy market
volatility is often experienced during Bernanke's speeches.

Recent price action in the EURUSD suggests that the aggrandizement of the currency
pair may not stop at least until the 1.50 level is breached. According to our
internal data, positioning has not reached extremes, as traders continue to fade the
move.

* EUR
The EUR surged vs. the USD, on track for its biggest one-day percentage gain this
year, sending European stocks down nearly 1%. The European currency hiked after
Chinese officials suggested that their country should look to diversify its 1.4
trillion dollar currency reserves into stronger currencies and explicitly mentioned
EUR, which sent the single currency flying to fresh record highs. Yesterday, the EUR
raced to an all-time high of $1.4730, before retreating to $1.4627 in the late
evening, still up 0.7% on the day.
It's likely that the EUR will reach 1.50 against the USD, but whether or not this
will happen soon will be dependent upon ECB President's Trichet comments at today's
news conference regarding the interest rate statement. The European Central Bank has
kept a 4% overnight lending rate for the last four policy meetings. The ECB is
expected to announce today, that it will keep interest rates unchanged. The central
bank's statement and the news conference, in which President Jean Claude Trichet
will offer up the monetary policy's outlook on growth and inflation, could trigger a
strong move from the high flying EUR. Failure from Trichet to show any displeasure
with the EUR rally at today's press conference will most likely trigger a move to
$1.50 per Euro.

* JPY
For the past two weeks, the JPY had been trading in a range, but yesterday broke
downward, closing in on a two month low. A sharp rise in risk aversion only
exacerbated the greenback's downfall against the JPY, with the USD losing a
substantial 200 pips to lows of 112.66 JPY. Growing uncertainty on the global
economy, which faces rising losses from the credit crisis, was fed by higher oil
prices, encouraging investors to unwind carry trades funded in JPY, thus boosting
the Japanese currency.
The impact of the high JPY is a substantial worry for the Japanese economy and if
Crude Oil does rise as expected toward the $100/barrel level, this will lead to
rising gas prices and start to really have an impact on the already dampening
Japanese domestic demand.

Today, Japan's economic calendar gives us the release of Machine Tool Orders and the
Eco Watchers Survey; neither of which should be particularly significant in moving
the market. The JPY may push further upwards against the USD today following Fed
Chairman's Bernanke speech.

Technical News
* EUR/USD
After the touch at the all time high of 1.4735, the pair now consolidates at 1.4630
and appears to be heading to 1.4600. The momentum is very bullish on all fronts,
especially on the 4 Hour chart, where we see a bullish cross forming, which will
probably take the pair higher, back to the 1.4700 level.

* GBP/USD
The cable is in the midst of a very strong uptrend which peaked at 2.1060 yesterday.
The hourly charts are showing that a certain correction is imminent, while the daily
charts are showing an intensive bullish sentiment. It looks as if the 2.0900 level
might be reached before the cable breaks an additional record level.

* USD/JPY
The ongoing wide range the pair has been going through in the past two months has
been violently breached. The USD/JPY is steadily heading to 112.00 which is a key
support level. A breach through the key level will validate a much deeper downtrend
that might end at 111.00 on a weekly perspective.

* USD/CHF
The 1.1250 level failed to be breached yesterday, and was marked as a very strong
support for the pair. The 4 hour chart is indicating a strong bearish momentum and
dailies support the notion that we might see 1.2175 today. Looking for a good short
entry point appears to be preferable today.

The Wild Card
* Crude Oil
The uptrend the Oil is going through at the moment is probably the strongest trend
in world markets today and has massive implications on world wide economy.
Forex traders have a fantastic opportunity to join a trend which is supported by
much more than the technical indications we see in the hourly and the daily charts.
A great entry point might be available at the moment as the pair now floats around
the bottom section of the 4 hour channel and might be a great entry point for Oil's
journey into the 100$ zone.

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