The USD continued to rebound yesterday after a surprising gain in January Retail Sales suggested consumer spending was holding up…. … Retail Sales increased 0.3% last month, following a 0.4% drop in the prior month.

Government data showing higher Retail Sales in the month of January – diminished
economists' expectations for a decline in the greenback. The report was also a
surprise for investors because it followed a weak January jobs report and shrinking
service sector numbers, which normally acts as an early indicator to sub par Retail
figures .

Yesterday's data pushed the greenback primarily against the JPY, while against the
rest of the major currencies such as the EUR and GBP, the USD remained relatively
unchanged. Traders continue to scale back positions ahead of today's' testimony by
Fed Chairman Ben Bernanke. The Federal Reserve Chairman may signal more rate cuts in
the near future, as the last few days of bullish dollar behavior may only be a
glitch in the bearish dollar trend that has existed for most of 2007 and 2008. Based
on Interest Rate Futures, markets are expecting the Fed to reduce its benchmark
interest rate to as low as 2% this year, although expectations for another 50bp rate
cut have decreased. The market is now pricing in a 68% chance for 50bp cut, down
from yesterday's 80%.

Today, the greenback's momentum may continue as all attention will be focused on the
U.S. Trade Balance, Unemployment Claims data and Fed Chairman Bernanke's speech. We
may see the greenback extend its gains across the board if the U.S. news surprises
on the upside but it may also retreat slightly as the current market sentiment seems
to be that the recent USD rally is running out of steam.

* EUR
After developing a small rally for 3 days running, the EUR lost ground against the
USD on the back of weaker Euro zone Industrial Production and stronger U.S. Retail
Sales numbers yesterday. The EUR was down 0.1% at $1.4569 after hitting a session
low at $1.4534.

The unexpected increase in Retail Sales, helped ease fears of an economic slowdown
in the U.S., placing some additional pressure on the 15 nation currency. The
European market was looking for Industrial Production to accelerate in the month of
January, but instead the indicator printed at -0.2%, far below the forecasted 0.5%.

Today, we await the release of the GDP data from Germany and France. Both of the
figures are expected to drop, further dragging the EUR down. Today's price action
could be critical in determining whether the retreat this week is a correction or a
larger rebound in the greenback.

Also the ECB President Trichet is expected to deliver a speech later today in Spain.
The speech will be closely followed by investors for hints on future ECB monetary
policy. Today, we may see the EUR extending its losses against the USD if the U.S.
news will indeed surprise on the upside.

* JPY
Yesterday, the JPY dropped to a one-month low against the USD after U.S. government
data showed an unexpected rise in Retail Sales last month, easing concern that the
biggest economy will slide into a recession. On its way down, the JPY reached a low
of 108.37 before easing to 108.10 by the end of Tokyo session yesterday.

Carry trades unwind resumed yesterday as the Japanese GDP figure rose to 0.9%, after
growing only 0.3% through the previous quarter. On the other hand, The GDP deflator,
a broad measure of prices used to derive real growth from nominal, fell 1.3% from a
year earlier, the biggest drop since 2006.

Today the Japanese economic calendar is barren of any scheduled events. Forex
traders should keep an eye on the economic events around the world, as today could
prove to be very volatile.

Technical News
* EUR/USD
The pair is consolidating around 1.4570 with a moderate bullish momentum. The 4 hour
chart is still bullish and the daily chart indicates that there is still room to
run. 1.4590 is a key Fibonacci level which if breached will validate the next move
up with a target of 1.4650.

* GBP/USD
The 4 hour chart is showing a very strong uptrend with increasing momentum. The
1.9650 level was fully breached indicating that the bullish momentum will continue
to grow locally. The daily RSI is floating around 50 which indicate that on the
longer run we might see the trend reach 1.9850 as a valid target price.

* USD/JPY
The much anticipated breach through the 108.00 has occurred, as the pair now heads
up north. The positive slope on the daily slow stochastic strengthen the notion that
the bullish momentum is about to grow. Being on the buy side appears to be the right
choice today.

* USD/CHF
The pair maintains the bullish move with a diminishing momentum. The daily chart is
indicating an upcoming bearish with a potential to bring a bearish correction move.
The 4 hour chart is still bullish which make the selling on high strategy quite
feasible today.

The Wild Card
* Gold
The massive uptrend continues with full momentum as Gold is now regaining energy for
the next move on the daily channel. All oscillators support the bullish notion and
this could be a great opportunity for
forex traders to enter a very intensive uptrend with no intentions to stop.

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