Rethink Foreign Exchange

The new highs the Greenback reached yesterday in the majors are at long-term resistance levels now. We expect these levels to hold in the days to come, giving the USD time to digest its new surge. The major pairs showed some of the correction moves in early European trading already, reflecting the overbought condition of the U.S. currency. We expect the sideways market to continue today, with trading ranges offering enough room for further downward corrections for the USD, as described in

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EURUSD: EUR pushed through and closed below its strong YTD support at 1.3882 Thursday testing a low of 1.3747 before ending the session at 1.3804.While maintaining its current momentum and trading below its invalidated support, weakness is expected towards another key support located at its April’07 high at 1.3682 with a cut through there opening the door for further lower prices towards its Dec’04 high/August’07 low at 1.3366/61.We expect the pair to take a breather after the latter level is

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Key test for market sentiment today with TARP vote up in the House and after US equities touched recent lows yesterday. MAJOR HEADLINES US Aug. Factory Orders fell -4.0% vs. -3.0% expected Australia Sep. AiG Performance of Service Industries rose to 44.9 from 39.3 in Aug. Switzerland Sep. CPI out at +0.1% vs. -0.1% expected THEMES TO WATCH – UPCOMING SESSION Key Risk Events (All times in GMT) Norway Sep. PMI (0700) Germany Final Sep. Services PMI (0755) EuroZone Final Sep. Services PMI (0800)

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Trading in the currency markets today is extremely quiet as everyone awaits the U.S. employment numbers due out at 14:30 CET. Forecasts are calling for a drop in the Non-Farm Payroll numbers of between -50,000 to -90,000 jobs, with an average forecast of -75,000. Currently, the general market sentiment is for a stronger dollar in reaction to the dollar’s recent losses over the last few weeks. This sentiment has the potential to set up a “buy on rumor, sell on fact” scenario when the U.S.

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This session trend: other majors are expected to make volatile moves for week end .

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USDCAD breaks initial resistance yesterday on collapsing oil prices - time for a range break? MAJOR HEADLINES – PREVIOUS SESSION US Apr. ISM Manufacturing out at 48.6 vs. 48.0 expected and 48.6 in Mar. US Mar. Construction Spending out at -1.1% vs. -0.7% expected Australia Mar. Retail Sales out at 0.5% vs. 0.3% expected Germany Mar. Retail Sales out at -0.1% vs. 0.6% expected THEMES TO WATCH – UPCOMING SESSION Key Risk Events (All times in GMT) UK Apr. HBOS House Prices (0700) Switzerland Apr.

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All eyes this week on Fed guidance at Wednesday’s FOMC rate announcement. Japan on holiday for much of the week. MAJOR HEADLINES – PREVIOUS SESSION US Final Apr. University of Michigan Confidence out at 62.6 vs. 63.2 expected Japan Mar. Retail Trade rose 0.5% vs. 0.7% expected THEMES TO WATCH – UPCOMING SESSION Key Risk Events (All times in GMT) Germany May GfK Consumer Confidence (0610) EuroZone ECB’s Trichet and others to speak (0700) Germany Apr. CPI (no time given) New Zealand Mar. Trade

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EURUSD- Following a brief break and hold above the 1.5896/1.5913 area, its Mar 31’08/April 10’08 highs on Tuesday and its subsequent failure at that area, EUR sold off hard for a thirdday in a row on Friday closing at 1.5626.This move now leaves the pair below its triangle pattern(daily chart) and with price action still pointing lower, risk remains for a push towards the 1.5510 level, marking its Mar 24’08 and then its .382 Fib Ret/April 03’08 at 1.5390/42.The daily and weekly RSI are

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Canada employment report and Ivey PMI also on tap today. Risk appetite still appears strong - but for how long… MAJOR HEADLINES ? PREVIOUS SESSION Overnight developments: US Mar. ISM Non-manufacturing out at 49.6 vs. 48.5 expected and 49.3 in Feb. Australia Feb. Retail Sales out at -0.1% vs. +0.3% expected Switzerland Mar. CPI YoY out at 2.6% vs. 2.5% expected THEMES TO WATCH ? UPCOMING SESSION Key event risks today (all times GMT): Germany Feb. Factory Orders (1000) Canada Mar. Unemployment

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EURUSD: EUR recovered from an intra day low of 1.5552 Wednesday to close the session at 1.5683.This is coming on the heels of a failure at 1.5895(Mar 31?08) level and a subsequent follow-through lower on Tuesday. While both the medium and longer term trends remain to the upside, a clean penetration and hold above the 1.5895/1.5904 levels, representing its 2008 peaks is required to resume that trend and prevent the present downside threat. In such a case, its psycho resistance at 1.6000 and the

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