It seems as if the US housing troubles have just started. Wall Street extended its slump into yet another week… … Monday, as investors worried that even a safety net set up for mortgage financiers Fannie Mae and Freddie Mac wont' head off further troubles in the financial markets.

Worries over Fannie Mae and Freddie Mac led to a
volatile session in which the Dow dipped below the 11,000 mark for the first time in
about 2 years.
Investors' latest unease about the banking sector comes in a week when many
financial names are to issue quarterly reports – many of which will likely include
sizable write-downs of souring mortgage debt. While combining that information with
US housing figures due out on Thursday, we may definitely expect the Building
Permits and the Housing Starts figures to deteriorate, closing much lower than
forecasted.
The Greenback saw mixed results yesterday against its major currency rivals as the
absence of any fundamental data left the USD movement in the hands of market
speculators. The EUR/USD fell from 1.5961 to 1.5864 during the short period after
U.S. Treasury Secretary Henry Paulson announced a rescue plan with tighter mortgage
regulations for the failing mortgage lending giants Freddie Mac and Fannie Mae.
However, it didn't take long though for the USD to take a hit as US Stock markets
sank over the poor economic outlook and the EUR/USD closed the day over 1.59 again.

The approval of new mortgage lending rules by the Fed is focused at forcing lenders
to revaluate whether borrowers can repay the loans they take out, while limiting
those who can take loans in general. The move comes not long after the Fed was given
more power to control the broader spectrum of the US economy. For many analysts the
USD recovery will depend on whether the Fed initiatives were enough to calm
investors' worries over the poor state of the country's biggest lending firms. Any
improvement in their credit spreads and shares may help the dollar regain some
strength.

Today should be vital in mapping the short-term movement in the USD as traders
should expect a batch of mixed US data. Core Retail Sales and Retails Sales are both
expected to see small gains meaning that US investors' confidence is still not all
together broken. The expected 1% increase in Core Retail Sales and 0.5% rise in
overall Retail Sales will show that despite rising energy prices and a faltering
credit and housing sector, tax rebates are being spent. Today's Producer Price Index
looks to stay unchanged and could help contribute to any positive movement in the
USD. Still though, these events will likely be overshadowed by Fed Chairman, Ben
Bernanke speech. The Fed chairman is expected to testify before the Senate Committee
on Banking, Housing, and Urban Affairs issues in Washington DC; A hawkish statement
and mostly unchanged rhetoric can be expected from Bernanke, however he will likely
come under significant scrutiny to discuss the current state of the US economy and
whether or not the steps to bail out Freddie and Fannie will really help he US
economic outlook and. Expect his remarks to contribute once again to a highly
volatile trading day in the Forex market.

* EUR
The EUR finished yesterday's trading session with mixed results as it escaped
mid-day bearish trends versus the major currencies. Poor economic data coming from
the Euro Zone and the emergency plan of the Fed to restore investor confidence,
contributed enormously to set the trend direction of the 15 nation currency.
The only economic data for the Euro Zone (EZ) we had yesterday was Industrial
Production which fell by 1.9% in May from April in comparison to the 0.6% during the
same period last year. The result wasn't surprising as the EZ has shown a decrease
in efficiency and production for quite a while. Yesterday's drop, the sharpest in
over 20 years, proved that it is still an issue. Since 2007 production of durable
and non-durable consumer goods has declined by 5.2% and 3.2% respectively, causing a
decrease in Industrial Production numbers. The ECB will continue to play tug o' war
with inflationary worries and overall production numbers, as the high value of the
currency has begun to affect broader aspects of the EZ economy.
On tap from the Euro Zone today, we will see the publication of German ZEW Economic
Sentiment. The indicator measures institutional investor sentiment and more
specifically reflects the difference between the share of investors that are
optimistic and the share of investors that are pessimistic. It's forecasted to
dercrease to a mark of -55.5 largely on the back of pessimistic expectations due to
the recent rate hike and poor economic data in the recent future from Germany and
the rest of the EZ. Also on tap for today is the monthly ZEW Economic Sentiment for
the whole of the EZ, also forecasting a heavier pessimist sentiment as the mark is
expected to lose over 3 points to -56.0. Though the outlook of the USD is far worse,
the EUR could experience some bearishness versus the other currencies today on the
back of poor fundamental news. As the EUR/USD approaches record highs, the
psychological level of 1.60 combined with positive US data could prevent the pair
from hitting news highs.

* JPY
During yesterday's trading session, the Yen saw volatile movement versus most of the
major currencies, while most of the day was spent making gains. Like the EUR, the
JPY fell against the USD following the announcement from the US regarding the Fed's
emergency credit plan. Still though, concern in Japan regarding the economy and
currency is high as growth continues to deteriorate alongside consumer confidence.
As we look ahead to today's BoJ press conference we can expect to hear some
worrisome tones. The BoJ kept a hold on the interest rate at 0.50% early this
morning, and as we await the monthly report it is likely to present a downgraded
outlook for the economy. Sponsored primarily by surging crude oil prices and the
crisis in the credits markets, the JPY is treading on very thin ice. The recent
economic data from Japan suggests that the Japanese economy is entering a recession,
however the BoJ does not have much it can do to pull the Asian giant out of it at
this point.
Today, a batch of data is expected from the Japanese economy; as stated earlier the
overnight call rate remained unchanged at 0.5%, as we await the BoJ monthly report
and BoJ press conference. Traders should follow today's news with extra caution, as
the news should generate higher volatility than usual for the JPY. Most importantly,
JPY traders should keep their eyes glued to any changes in the Dow Jones as the
index has been the primary catalyst in regards to JPY movement.

* Oil
Yesterday, Oil prices were steady on mixed supply concerns. Crude futures swung near
145 U.S. dollars a barrel Monday on mixed news of global supply concerns and USD
tradings. Price action staged between 142.49 dollars per barrel and 146.37 dollars
during the trading session.
U.S. President Bush lifted an executive ban on offshore oil drilling on Monday and
urged the U.S. Congress to act as well in a bid to cool the high energy prices.
However, analysts do not believe that such a move will ease the tight global crude
supplies in the short term, because it would take months or years to get actual
output from new fields even if the bans were removed.

Technical News
* EUR/USD
The pair is in the middle of a very strong uptrend, and is testing fresh highs on a
daily basis. The very important key resistant level of 1.5930 has been breached and
the pair is likely to continue is bullish trend. Next target price might be around
1.6000.

* GBP/USD
There is a very accurate bullish channel forming on the 4 hour chart, as the cable
now floats in the upper barrier of it. The Slow Stochastic on the 4 hour chart shows
that there is still more room to run and that going long is probably the best choice
today.

* USD/JPY
The 4 hour chart is showing that the pair is still floating within its bearish
channel. However, the RSI on the hourlies has crossed the 30 line, indicating that
the market is oversold. The Slow Stochastic is also showing a fresh bullish cross,
suggesting that a bullish trend is imminent. Going long with tight stops appears to
be preferable.

* USD/CHF
The 4 hour chart shows that the bearish channel still remains intact, as the pair is
now floating in the middle of it. Both the RSI and the Slow Stochastic on the 4 hour
chart are pointing towards bearish grounds, and no correction appears to be in
sight. Going short seems to be a good strategy today.

The Wild Card
* NZD/USD
The daily chart shows that the pair is in the middle of a sharp bullish corrective
move, as all oscillators are pointing up, indicating a very strong bullish momentum.
This is a great opportunity for
forex traders to join in a very strong trend that still has a lot of steam in it.

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