The strong selling of USD was boosted yesterday after hopes that a possible rescue plan for 'Ambac Financial Group', the… … second largest U.S. bond insurer, would help limit the damage from the ongoing credit crisis.

Also yesterday, the US Existing
Home Sales for January fell to the lowest level in 9 years while prices slid for the
7th consecutive month, posing a threat to consumer spending; the largest part of the
enormous US economy. By the end of the day, the USD remained range bound vs. the
EUR, while appreciating the most against its' high-yielding counterparts, most
notably the JPY.

Economic data from the US now shows the effects of the worst housing recession in 25
years have spread into other areas of the economy. The Fed Bank of Philadelphia's
general economic index fell this month to -24, the weakest reading in 7 years. With
other major sectors such as Employment, the financial markets and business
investment; the Fed now has more than just the housing market to contend with when
making its monetary policy decision. Currently, the market is pricing at a 65%
chance that the Fed will lower its Interest Rate by another 0.25%.
Today, traders may expect to see an overall increase in volatility as the US
economic calendar filled with eventful releases like the PPI, National Home Price
Index as well as the Consumer Confidence data, later in the afternoon. We expect the
USD to rally on the back of stronger inflation numbers but weaker consumer
confidence could cap the currency's rise.

* EUR
The EUR was little changed yesterday at 1.4821, taking a breather after hitting a
three-week peak of roughly $1.4862 last Friday.
The European markets rallied on hopes that 'Ambac', the embattled U.S. bond insurer,
may soon announce a rescue package. 'Ambac', is currently facing billions of dollars
of losses from guaranteeing repackaged subprime mortgages. The company is talking to
banks and regulators about raising extra capital in order to retain its top credit
ratings. With yet another fork in the road for invested US clients, the EUR
continues to become a much safer and stable alternative for long term success.
Today, investors will focus mainly on the German Ifo Business Climate as well as
German Ifo Business Expectations indices for February. Traders will try to find
clues on the health of the Euro-zone economy and its' interest rate outlook. The
underlying impression remains that the European economy is slowing down and that at
some point we could see interest rates in the Euro-zone decline. The hawkish stance
by ECB President Trichet could be challenged if the ongoing trends continue.
Today's economic news is particularly important for the EUR, and could be
responsible for a key turning point in for the 15 Nation currency. It will be
crucial for traders to identify how the preceding economic indicators from Europe
and the US will affect the currency. Investors may expect another volatile trading
session.

* JPY
The JPY fell broadly yesterday as news over the U.S. bond insurance sector boosted
stock prices and other risky assets. The JPY also fell after a report showed
declines in the sales of Existing Homes in the U.S. slowed last month, signaling the
housing slump may be closer to a bottom than ever before.
The USD/JPY dropped to a session low of 108.21 before consolidating around the
108.00 level by the end of late Tokyo session.

Risk aversion has subsided and appetite among investors to borrow in JPY and invest
in risky high-return investments is back in play. The Yen often suffers in times of
rising risk appetite because investors borrow it at low Japanese interest rates to
fund “carry trades” that invest in higher-yielding currencies and assets.

It appears that in the short term the JPY might suffer in this environment. There is
no significant economic news coming out of Japan today. We should see the JPY
continue on its bearish path. As for the long term, we need to keep in mind that
March is the most volatile month for JPY and we'll take a more in-depth look into
what this could mean for the JPY crosses as we approach the pivotal month. As the
Japanese fiscal year nears its closing we should begin to get a clear picture of
future trends.

Technical News
* EUR/USD
The pair has been going through a consolidation phase after a very strong and
consistent period of bullish momentum which was initiated near the 1.4450 level.
The daily chart is showing its first bearish signals, and the 4 hour chart is
floating in neutral territory. It appears that a correction move might be quite
imminent with the first target price of 1.4720.

* GBP/USD
The daily chart is showing a triple doji formation with a bearish cross on the slow
stochastic. The 4 hour chart is already indicating escalating bearish momentum, with
RSI and slow stochastic at a negative slope. It appears that going short might be
preferable today.

* USD/JPY
The pair has not yet made a significant move beyond the flat range it has been going
through in the past month. Forex traders are anxiously waiting for any breaks to
signal an upcoming strong trend, yet none are coming. All oscillators are quite
neutral, and no distinct direction is seen on the horizon. It is advised to wait for
a clear sign before entering the market.

* USD/CHF
After going through a very choppy month, the pair finds local consolidation at the
1.0900 zone. The daily chart is showing some bearish momentum with negative slope on
the slow stochastic, as the 4 hour chart is showing moderate bullish sentiment. It
appears that selling on highs might be preferable.

The Wild Card
* Gold
Gold is in the middle of a correction move that is now showing strong signs of
support. It appears that it will not be able to breach through the 931.00 level
which is a key Fibonacci level of the 854.70/953.20 move. The bullish cross on the
hour chart is strengthening the notion that
Forex traders might enjoy a great entry price for the upcoming bullish move.

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