We begin this trading week with tremendous speculation over how the greenback will perform ahead of Tuesday's interest rate statement. Last …. …

week, the dollar bounced back against the Euro due to surprising figures from ADP and Non-Farm data.
Combined with the surprise cut in UK interest rates the dollar strengthened against
its major counterparts, before re-adjusting itself back to levels of above 1.46
against the Euro prior the close of trading on Friday.

Most indications are that the Federal Reserve will once again cut interest rates by
a quarter of a percent from 4.50% to 4.25%, making it twice in the last two months
that the Fed has had to step in to control the dwindling dollar. The interest
statement, set to be released on Tuesday, December 11th at 13:30 GMT is one of many
pertinent economic news events on schedule this week. The US will see the release of
discount rates, Import Price Indices, Retails Sales, Core Retails Sales, PPI, Core
CPI, and Industrial Production numbers. The aforementioned news will be
overshadowed of course by the Trade Balance numbers on Wednesday and the Interest
Rate statement on Tuesday.

On tap for today's economic calendar are the monthly Pending Home Sales numbers.
The figures are expected to be down a bit over 1 percentage point from 0.2% to
-1.0%. It should be said however that last week's forecasts were way off, so we
should wait and see.

This should be an important week for the greenback as it will have to react strongly
to rates cuts in order to set a corrective trend as we grow even closer to 2008. One
should be wary of how the Dow Jones performs as well this week to gage how much
confidence is still behind the greenback.

* EUR
The European community was hit with quite a stunner, as the British unexpectedly cut
interest rates to spark even further gains to the dollar in the early part of last
week. What had already been a slow week for the Euro, turned into quite a scare, as
the dollar exhibited some of its old school dominance in the marketplace. The Euro,
which had been above levels of 1.47 quickly dropped to under 1.46, before correcting
itself by week's end.

ECB President Trichet noted at a press conference shortly after EU interest rate
statements, that there was talk of an interest rate hike at ECB meetings, but that
“The reappraisal of risks in financial markets is still evolving and is accompanied
by continued uncertainty about the potential impact on the real economy, and that is
the reason why we consider that it is not opportune to decide today (to hike
rates)”.

The EU Economic calendar is reserved with several indicators of little to no
significance. Of the 15 or so events due up, only the ECB Monthly Bulletin and
German ZEW Sentiment are of any real consequence.

The fate of the 13-nation currency will rest heavily on trader response to US
interest cuts and the invigorating progress coming from the Dow.

* JPY
The Japanese Yen has watched along as the Dow Jones has begun to recover some
ground, thus forcing the inevitable drop in carry trading. The Yen's lucrative
position on carry trades has left it dependent on outside factors, with the most
pertinent information being that from the US.

Last week, the USD/JPY rose steadily as investors foresaw the Dow movement and began
to abandon high yielding assets. The currency pair jumped from 109 support levels to
over 111 as early morning trade in the Far East began.

The economic calendar for Japan this week stays somewhat dull as the only real
highlight should be that of the Tankan Large Manufacturers Index. The index measures
the general business conditions of large manufacturers and is important to be noted
that traders pay special attention to the Tankan survey because it's one of the few
growth indicators produced directly by the BoJ.

It looks as if the JPY will continue to float on a moderate bearish notion, at least
until the end of this trading week.

Technical News
* EUR/USD
A bearish channel is establishing On the 4 Hour chart that might take the pair to
the 1.4500 – 1.4560 levels. The first target price is located at 1.4615 (Fibonacci
38.2%) and the second target price located at 1.4579 (Fibonacci 23.6%).
If the 1.4660 level will not be breached, then going short looks like a preferable
strategy for today.

* GBP/USD
On the 4 Hour chart a falling wedge structure is establishing and in case of a
completion, we might see the pair relocated at 2.0100. The Slow Stochastic has
crossed the 82 level and momentum has a negative slope that supports the upcoming
bearish trend. It looks as if the bearish trend might continue for the short run.

* USD/JPY
The pair's massive correction from the 107.00 level continues, as we now see the
second bearish cross on the daily slow stochastic. Together with the Doji formation
there is a great possibility of a local bearish move that might take the pair back
to the 110.50 level.

* USD/CHF
The pair's movement is quite moderate and characterized by relatively low liquidity,
with a slight bullish move. Indicators on the 4 hour level shows mixed signals, as
the daily studies are still a bit bullish. Waiting for a clear signal on the hourly
level before entering the market might be wise.

The Wild Card
* Crude Oil
The bearish trend continues at full steam, as all oscillators show that there is
still more room to run probably into the 86.00 levels on the next local move. This
is a great opportunity for
forex traders to use the strong bearish momentum and take profits on the short run.

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