Global markets reacted positively to news that the British, French, and German governments would commit funds to the prop up… … the continent's banking sector.

Yesterday's trading lacked the price volatility that has been seen in the USD the
last two weeks, with the Dollar dropping against the EUR and GBP, while taking
slight gains against the JPY. U.S. financial markets were closed yesterday for a
banking holiday.

Not just with words, but with firm commitments to action by the European governments
helped push the Dollar lower yesterday against the EUR and the GBP. Perhaps traders
were waiting for assurances that the worlds largest banks would not be allowed to
fail, as was the case with Lehman Brothers. Government intervention is helping to
reduce risk aversion, easing investor fears, and in turn creating the opportunity
for traders to get back into riskier assets. Recently currency markets have
witnessed a flight to safety in the Dollar and the JPY. During the past two weeks
the Dollar has made gains of over 1200 pips against the EUR and dropped against the
JPY almost 600 pips.

Today we will hear from FOMC Member Plosser and his remarks regarding the current
state of the U.S. financial system. Traders will be listening for any hint as to the
implementation of the U.S. financial rescue plan. Investors will continue to look
for added confidence in the markets. Recently this has been in the form of
government intervention. Another factor that has gone largely unnoticed in the
currency markets has been the steady drop in Crude Oil prices. The price of Crude
may not stay depressed for long. Any resurgence in Crude prices could push the USD
lower in the short term.

* EUR
European Bank Bailout Program Takes Shape
With no economic indicators released yesterday, the 15 nation currency's movement
was mainly affected by the G7 rescue plan. Finally with such a move the European
economy is expected to boost consumer confidence. The effect has already influenced
the markets as European shares in the equity markets managed to rise 4.5% throughout
the early hours.

The French Finance Ministry held a press conference yesterday to announce the
creation of a 40 billion euro fund to purchase bad bank debts. Similar announcements
are expected by additional Nations across Europe, while some have already been
announced yesterday. With more and more central banks taking action to save the
European banking sector, we may possibly see stabilizing equity markets and the EUR
currency stabilizing in the near term.

With a batch of indicators to be released today, expectations for a more intense
trading day today are high. ECB Trichet will hold a speech today in New York, while
we can expect the German ZEW Economic sentiment to provide a better view of the
European economic health. Traders may be looking in both ways as to the direction of
the European economic health. Recently the Euro-Zone economy has been trending down
but, with the recent European government bailout announcement, look for the EUR to
post small gains in the near future.

* JPY
JPY Jumps as Panic Grips Investors
As Japanese investors begin liquidating in excess of $1.3 trillion in overseas
assets in order to bring money into the country, the Yen continue to extend its
gains against its major currencies. The reason for the reshuffling of assets is due
to the global slump in equities.

The Yen, which is a preferable currency in times of financial uncertainty, looks set
for further appreciation. The Japanese currency may advance to 95 per Dollar should
Japanese investment trusts, insurance companies and pension funds start selling
foreign holdings. Yesterday the JPY rose for the third straight day to 99.87 from
100.67 per dollar at 12:04 p.m. in Tokyo on Friday. It has gained 8% over the past
month. There has been almost no change in JPY versus the EUR, after European leaders
agreed to guarantee bank borrowing and bolster big lenders. It declined to 134.76
Yen, from 134.96 at the end of last week.

As European countries have further room to cut Interest Rates in response to slowing
global growth, evolving yield differentials should be further supportive of the Yen.
The European Central Bank's benchmark rate of 3.75% compares with 1.5% in the U.S.
and 0.5% in Japan. Traders raised bets on an ECB rate cut later this year.

* OIL
Unexpected Rise in Crude Oil prices
Crude Oil begins to gain after falling below $82 a barrel at the end of last week.
It rose after policymakers around the world took new and drastic steps to rescue
banks and prevent the global economy from sinking into recession.

The governments of the U.S., Europe and Asia are offering their support for the
banking system to stem the financial crisis threatening the global economy. After
Crude declined for the past few months on concern that a global recession will cut
demand for fuel, the market waits to see some evidence that these government
interventions are having a positive influence, or are at least dampening the global
panic. The recovery process is likely to be very long winded and will likely take
about as long as the crisis. If government measures to shore up markets succeed, Oil
prices will be poised for a recovery.

Moreover, since the EUR jumped the most in three weeks against the dollar today on
the region's bank rescue plan it will also likely to speed up the crude prices .
Because a weaker dollar typically supports Oil prices, it makes commodities cheaper
for buyers in other currencies.

The announcements from over the weekend are likely to have some positive effects on
the markets. And even though it's still very early at this stage to say if they
would put an end to the financial crisis, the market's positive expectations are
more than likely to raise crude prices.

Technical News
* EUR/USD
The daily chart shows fresh signs of a bullish move, suggesting that the downtrend
has vanished. The 4 chart's RSI also supports this notion indicating that the
upwards momentum has more steam in it. Going long with tight stops might be the
right strategy today.

* GBP/USD
The daily chart shows fresh signs of a bullish move, suggesting that the downtrend
has vanished. The 4 chart's RSI also supports this notion indicating that the
upwards momentum has more steam in it. Going long with tight stops might be the
right strategy today.

* USD/JPY
On a daily chart the pair is showing consistent bullish momentum for a while now and
today is no difference. Although the signal is not strong the pair might have a
local target at 1.0400, which might make it feasible for forex traders to go long
with tight stops.

* USD/CHF
The pair has been range-trading for a while now, with no specific direction. The
Daily chart's Slow Stochastic providing us with mixed signals. All oscillators on
the 4 hour chart do not provide a clear direction as well. Waiting for a clearer
sign on the hourlies might be a good strategy today.

The Wild Card
* Oil
The 4 hour chart is showing growing bullish momentum, while the daily studies also
support that notion. This may prove to be a good opportunity for
forex traders to join a potentially strong uptrend that might yield high profits.

www.forexyard.com