Yesterday the GBP/USD suffered sharp losses and hit its lowest level in 6 years. The Cable lost 3.7% to end… … the day at $1.4893. The British Pound has been badly hurt the past five months from an economy that is operating in a recession and sharp cuts in Interest Rates by the Bank of England (BoE).

BoE Governor Mervyn King yesterday said the drop in the Pound does not come as a
surprise, and only further losses could spark a currency concern for the BoE. He
also openly endorsed a policy for the further easing of Interest Rates to combat a
recessionary environment. Currency traders may see a continued drop in the GBP/USD,
potentially to the 1.4400 level.

The U.S. Treasury Department announced changes to the $700 billion Dollar financial
system bailout. Funds will no longer be used to purchase bad asset-backed
securities, but will instead go to recapitalizing troubled banks' balance sheets.
Capital will be directly invested in U.S. banks as the government will take equity
positions to prevent further bank failures. The Dow Jones Industrial Average lost
4.7% of its value today after U.S. Treasury Secretary Paulson's announcement.

The Dollar was strengthened yesterday by an increase in risk aversion and a drop in
Oil prices as traders moved from higher yielding currencies to the Dollar. The
revised financial bailout plan sparked investor's fears that the U.S. plan to
restore liquidity and reduce the lock-up in credit markets is not having the desired
effect. A lack of confidence and an increase in risk aversion will motivate traders
to buy Dollars over riskier and higher yielding currencies.

* EUR
EUR Continues its Decline
A flight to safety may have been the cause for the drop in the EUR/JPY. The EUR slid
against the Yen yesterday to close down at 119.08, its lowest level in a month, but
posted strong gains against the GBP to end the day at 0.8359.

The EUR/USD may find a new resistance line in the 1.2500 level. Yesterday the EUR
closed below the 1.2500 mark at 1.2458. This continues the bearish trend for the EUR
as a steady stream of negative economic data has sent the EUR lower. Yesterday's
trading session was the third consecutive losing day for the EUR against the Dollar.

Traders may be looking for a reversal of the EUR's bearish trend with positive news
from Germany. Today the German Preliminary GDP is set to be released. German GDP is
forecasted to contract -0.2% for the third quarter. A better than expected GDP
showing could stop the EUR's slide against the Dollar and the Yen. But a less than
forecasted number could provide more support for further Interest Rate cuts from the
European Central Bank (ECB).

Also, ECB President Trichet will speak today, followed by meetings with his U.S.
counterpart, Fed Chairman Bernanke. The two are expected to participate in
discussions to coordinate monetary policy. In a joint move last month, both the ECB
and the Fed simultaneously cut Interest Rates amid the growing financial crisis.

* JPY
JPY Positive from Low Risk Appetite and Carry Trade Reduction
The JPY continues its month long run against the Dollar and EUR. Yesterday was no
exception as the USD/JPY ended the day at 95.57.

The boost to the JPY may be due to a cyclical rebound that has more to do with other
countries, a reduction in carry trades, and a lack of risk appetite. The JPY has
seen considerable strengthening the past months.

The massive deleveraging that is occurring has steadily increased the JPY as
investors close their carry trades, paying back loans that were taken out in
Japanese Yen. As the currency is converted back to Yen, this appreciates the JPY
against the Dollar and EUR.

The sudden shift in policy by the U.S. Treasury Department did little to reduce risk
in the market. The market is looking for stability. When the Treasury announced its
intention to change their strategy with regards to the U.S. financial bailout
package, markets accepted this announcement as added risk. This risk factor needs to
be countered, otherwise the recovery may be more difficult and the JPY may continue
to appreciate.

* Oil
Crude Oil Falls to 21-Month Low
Crude Oil continues its decline, settling at $55.24, for a loss of $4 on the day.
This puts Crude Oil at a 21-month low. Oil is well below the psychological level of
$60. This support line has been broken and sustained.

The quick spike in demand from the Chinese stimulus plan has quickly faded
throughout the week as Oil continues to head lower. Demand is weakening amid a
period of global economic contraction. The $50 mark for Crude looks to be in sight.
Traders that were once bullish on Oil are now unwinding their positions and
investing them in Dollars.

There is almost zero evidence to support a reversal of this bearish trend. Today
should be no different as the U.S. Crude Oil Inventories report will be released.
Traders are also speculating that the International Energy Agency will lower its
forecast for global Oil consumption, due to be released next month.

Technical News
* EUR/USD
The 4-hour chart is showing that the bearish momentum is back with full steam ahead,
as the pair lost more than 400 pips in the last 72 hours. The daily Slow Stochastic
is showing no crosses, which indicate the continuation of the bearish trend. Going
short appears to be preferable today.

* GBP/USD
The moderate bearish price movement continues within the bearish channel which still
has yet to be breached. The daily chart's Slow Stochastic is negatively sloped and
the 4-hour chart is also slowly joining the bearish notion. The RSI is floating
around the 50 level pointing to the continuation of the bearish movement. Next
testing point should be around 1.4800. Going short appears to be preferable today.

* USD/JPY
The momentum which was created by the breach through the lower barrier of the
channel on the daily chart continues with full steam. The 4-hour chart is still
quite bearish, as the daily chart is showing its first signs of a halt. Going short
with very tight stops might be a preferable strategy today.

* USD/CHF
After touching a base at 1.1800, the pair now consolidates a bit higher at around
the 1.1900 level. All oscillators show that the bullish momentum will probably
continue. The Slow Stochastic of the 4-hour chart is showing no crosses in the
horizon, and the bullish momentum there appears to be intact as well. On the daily
chart, this pair is still trending upwards and there are no imminent indications of
a reversal. Therefore traders can maximize profits by entering steady long
positions.

The Wild Card
* Gold
There is a very distinct upwards channel forming on the 4-hour chart. A fresh
bullish cross on the 4-hour chart's Slow Stochastic implies that the bullish
correction is quite imminent. The RSI is floating in an oversold territory
supporting the notion that there is still more room for the upwards correction.
Forex traders can maximize profits by buying on lows and taking advantage of a
currently bullish trend.

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