The USD was up against the EUR and held steady against its other European rivals early Thursday in New York… … as the Bank of England cut interest rates. The BoE's Monetary Policy Committee cut its key interest rate to 5.5% from 5.75% yesterday, the first cut in 2 years, as evidences mounted that the economy is slowing.

Overall, the USD remained relatively unchanged after the U.S. jobless claims fell.
President Bush is set to unveil plans to help struggling homeowners to avoid
foreclosure and this move is expected to help circumvent a U.S. economic recession.
However the U.S. still faces a deteriorating housing market for at least another 6
months.
Despite the greenbacks' strong performance over the past 2 days, however, analysts
cautioned against jumping on a dollar-recovery bandwagon too soon. There are still a
lot of reasons for the EUR/USD to hold above 1.4500. Financial markets remain
susceptible to bad news flow and rate differentials are unlikely to move
substantially in the dollar's favor too quickly.

Today, traders may expect USD moves to be choppy as the Nonfarm Employment Change
figure is expected to be released. This is indeed one of the most market-moving
indicators, and with the FOMC rate decision and policy statement looming on the
horizon next week, equity markets could see wild price action. The change in the
U.S. Non-Farm Payrolls for the month of November is anticipated to rise to 75K, down
from 166K in October.
However, following last Wednesdays' surprising jump in the ADP Nonfarm Employment
report, the Nonfarm Employment Change figure is difficult to predict. A
weaker-than-expected reading could send EUR/USD towards 1.4750 once again, as
traders increasingly bet that the FOMC will indeed cut rates next week. On the other
hand, a surprisingly strong NFP report could help EUR/USD continue its descent
towards 1.4350.

* EUR
The EUR extended gains vs. the USD yesterday after European Central Bank left
interest rates unchanged at 4.0% as expected. Investors focused on the ECB President
Trichet's comments where he stated that some governors at the bank would have
supported a rate increase. The ECB President also added that the risk in financial
markets is still evolving and is accompanied by continued uncertainty about the
potential impact on the real economy.
The EUR last traded 0.2% higher at $1.4627, after touching a session high of $1.4636.

But the biggest story yesterday came from the GBP side. The BoE's Monetary Policy
Committee cut its key interest rate to 5.5% from 5.75% yesterday, for the first time
in 2 years, casting aside inflation concerns as the surging cost of credit threatens
to derail economic growth. The Central Bank said in a statement that “conditions in
financial markets have deteriorated,'' adding to “downside risks'' to consumer
prices and the economy.

In response, the GBP fell to near a 2 1/2-month low against the USD after the
decision. It touched $2.0254 by 4:01 p.m. in London, compared with $2.0266
yesterday. The U.K. currency also traded at 72.220 per EUR, from 72.11 yesterday.

As for today, there is no real market moving news expected to come out of the
European markets. The German Industrial Production and the Composite Leading
Indicators are due to be released during the morning trading session. Both of the
indicators are of a minor importance. Later, traders will follow the ECB President
Trichet speech in Hamburg. As head of the central bank's governing body, which is
responsible for setting the Euro zone's short term interest rate, his speeches can
sometimes cause market volatility as traders react to clues regarding future
monetary policy.

* JPY
The JPY continued to weaken against the USD after leading indicator index continues
to signal economic contraction. Japan's leading economic indicator index rose to 20,
but has been below 50 for the third straight month. A reading above 50 indicates
economic expansion in months ahead. Economists are predicting the JPY to remain
range bound at the 110 level till the year end.

Today no news is expected from Japan, so the JPY should continue its downward trend,
particularly against the high yielders, as long as carry trades are back in action.
However it is also important for traders to follow the correlation between U.S
equities and carry trades as this could give a strong indication as to the future
direction of the JPY. Also it is important to note that the recent currency
volatility could once again create risk averse sentiment and discourage carry
trades, thereby rallying the JPY.

Technical News
* EUR/USD
This pair weakened sharply yesterday and it lost over a hundred pips, targeting the
key 1.4500 support level. However after failing to breach this key support level the
pair rallied back up. There is a downward channel appearing on the 4 H chart and
this pair is now trading in the middle of this channel. The preffered strategy today
will be to buy on dips and sell on highs. However traders should exercise caution as
volatility is up and the possibility a violent breakout exists.

* GBP/USD
After a downward breach of an upward channel on the 4 H chart, this pair weakened
sharply yesterday is now hovering around the 2.0250 level. The momentum and RSI are
relatively flat on the 4 H chart but they are still sloped negatively on the daily
chart. This gives us a strong indication that the bearish trend has not yet run out
of steam, with further possibility of sharp downward movement.

* USD/JPY
This pair is in the middle of a steady uptrend and all indicators still support the
bullish movement. This pair's next target will be the key resistance level of
112.00. However although the indicators are still positive we are in deep overbought
territory, so there is a possibility for this pair to make a downward correction
before making another surge upwards. The preferred strategy will be to wait for a
dip before going long.

* USD/CHF
This pair is now just above the bottom of a steady bullish channel on the 1 H chart
and should now be heading towards the top of this channel. This pair will now target
the 1.1350 level, although we are nearing overbought territory and the bullish rally
maybe running out of steam.

The Wild Card
* Crude Oil
There is an upward channel appearing on the 4 H chart. This commodity is now trading
near the top of this channel and since the stochastic slow is crossing at 80
combined with a negatively sloped RSI and momentum, we have a strong indication that
this pair will now head towards the 787.80 mark, which is the bottom of this
channel. This is a good opportunity for
Forex traders to maximize profits by entering an early short position.

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