The greenback has been appreciating sharply against the EUR since the release of the surprisingly weak U.S NFP report last… … Friday. Many analysts are still at odds as to why the greenback appreciated last Friday since the weak NFP report should have added to the existing bearish dollar sentiment.

Also there was more significant negative data for the greenback this week as the ISM Non-Manufacturing Index
released on Tuesday at 41.9 which indicated a sharp contraction in every major
component of the report from new orders, to employment and to business activity.
This negative data should have thrown the greenback to the bears as these
disappointing key economic figures practically assure another Fed rate cut at the
next FOMC meeting in March. This rate cut in March may once again be 0.50% as the
Fed will make a last ditch attempt to pull the U.S economy out of a recession.
Therefore this weeks' greenback rally against the EUR is somewhat of an economic
phenomenon from the fundamental perspective. Also the greenback continued its rally
against the EUR yesterday as traders remained cautious ahead of todays ECB Interest
Rate Announcement. The main theory as to why the greenback is currently rallying
against EUR on the back of this weeks' very negative U.S data, is that many analysts
expect the U.S economy to rebound in the second half of 2008 while Euro-zone growth
is believed to be heading for a freefall. Also the Fed is prepared to continue
slashing rates in order to prevent the U.S economy from slipping into recession,
while the ECB may stick to its hawkish stance with regards to its monetary policy
today amid signs of slowing economic growth in the Euro-zone. So on a broader and
longer term scale it seems that the when the U.S economy will be in reparation phase
the Euro-zone economy may very well be falling into the dark pit of slowing growth
and rising inflation. This is one of the main explanations for this weeks'
greenback rally as at the end of a dark tunnel there is always light. Also the fact
that the greenback is currently appreciating while there is very negative U.S data
is another sure sign that this rally could be the beginning of a longer term trend.

Yesterday there was no real market moving news from the U.S and traders will shift
all their attention to today's interest rate announcements by the ECB and the BoE,
therefore the greenback is likely remain relatively flat leading up to the
announcements and the speech by President Trichet. However there could be sharp
volatiliy on the back of these economic announcements. Traders should remain
cautious as we could be at the beginning of a rallying greenback trend, which is not
sufficiently justifiable at the moment.

* EUR
There was no significant data released from the Euro-zone yesterday but the EUR
continued to depreciate as traders remained cautious ahead of today's ECB meeting.
The Euro-zone economy suffered a solid blow on Tuesday when the Euro-zone PMI
released unexpectedly weaker, indicating a serious deterioration in demand and that
the U.S economic slowdown is now spreading into the Euro-zone. The ECB is expected
to keep interests rates unchanged at 4.00%, despite falling growth as it maintains
its hawkish stance with regards to inflation. However as a result of falling growth
the ECB will encounter criticism and an overly tight monetary policy may damage the
ECB's credibility. Also investors will closely watch President Trichet's speech that
will follow the interest rate announcement for clues on future monetary policy and
how the ECB is planning on tackling the issue of slowing growth and rising
inflation. This is a very pivotal moment for the Euro-zone economy as growth is
slowing so today's monetary policy by the ECB will have tremendous significance in
determining the future direction of the EUR. The EUR should experience some sharp
movement all across the board on the back of these news events today.

Elsewhere, the BoE will also announce its benchmark interest rate and it is expected
to cut rates by 0.25%, from 5.50% to 5. 25%. The UK economy has been severely hit by
the spreading credit crisis, particularly the Northern Rock Bank, which is one of
the major UK banks. Therefore the UK economy has been on slumping ever since the
credit crisis emerged and so the BoE may attempt to stimulate the economy by cutting
rates and thereby making credit more available. However the BoE will struggle to
balance slowing growth and keeping inflation within targets. The GBP has been
weakening steadily throughout this week against the greenback and once today's rate
cut is behind us the GBP should consolidate in the near term.

* JPY
The JPY continued its bullish surge yesterday as carry trades continued to unwind
ahead of today's two major interest rate announcements by the BoE and the ECB. Also
another major contributor to the current carry trade unwind was the fact that Asian
stocks posted their biggest loss in over two weeks as a result of concerns over the
state of the global economy. The JPY is likely to continue to appreciate as long as
risk-aversion maintains a strangle hold on investors. Earlier today during the Asian
session the only news released out of Japan was the Machine Tool Orders figure,
which measures the total value of new orders placed with machine tool manufacturers,
and it remained unchanged at 3.7%. The only other important news to be released from
the Japanese economy this week will be the Core Machine Orders, which measures the
total value of new orders placed with machine manufacturers, excluding orders for
items with a volatile sales cycle. This figure is expected to come in significantly
better than last month's figure of -2.8%, at -1.0%. This is very positive for the
Japanese economy as when manufacturers increase their purchasing of machinery it
signals that the manufacturing industry is in an expansion phase. However this data
is unlikely to cause any sharp movements in the JPY as the JPY gains remain
consistent with the current situation of higher risk aversion.

Technical News
* EUR/USD
The pair is trading in a range for the past three days showing after the previous
sharp bearish correction and is now consolidating around 1.4620. The 4 hour chart is
showing first buds of a bullish momentum whereas the daily chart is still bearish.
Selling on high might be preferable today.

* GBP/USD
The 4 hour chart is showing that the bearish momentum is regaining strength. The
slow stochastic indicates that this trend might continue until the cable reaches the
1.9520 level. The daily studies confirm the bearish notion, and it appears
preferable to go short today.

* USD/JPY
The ongoing tight range continues without a break of any significant importance. The
daily chart is maintaining a slightly bearish indication yet with no distinct
conclusion. The Bollinger Bands are tightening which indicates that the break might
be imminent. Traders are advised to hold for the break and then swing into it.

* USD/CHF
Due to high momentum, it looks as though the bullish correction will continue. The
RSI and slow stochastic of the 4 hour chart are showing a floating status which
strengthens the notion that the bullish move might continue. The current target
price is around 1.1040.

The Wild Card
* Crude Oil
There is a narrowing bearish channel forming on the 4 hour chart as Oil now floats
on the upper level of it. All oscillators show that an additional bearish break
through the 86.20 level will unleash a much stronger bearish move which can provide
Forex traders a great opportunity of a strong swing.

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