Forex Investment and Currency Trading

FX fundamentals: The Senate passing the TARP (with sweeteners) has done little for risk appetite, even though most now assume that the House will also pass it this week. The market remains very uncertain about whether this will really provide sufficient support to the banks to help unfreeze the money markets, and the focus is now switching to Europe and the potential for a similar package. The fact that the possibility of such a package was floated by the French is enough to make the market think it might be necessary, and it will now be hard for European confidence to stabilise without some action, even if this comes from individual governments rather than in co-ordinated form. There is little reason to expect a more orderly market in the short term, and as long as de-leveraging is the theme, the USD and JPY are likely to continue to benefit. There remains little reason to buy euros here. While we have come down a long way, there is scope for EUR/USD to move into the low 1.30s if the market continues to shun risk.

FX Technicals: EUR/USD - On course for the 1.3850 target near the 1.3844 50% retrace of the last 3 years. From where some market rebound may occur short term, but overall the bias is eventually further USD strength to see 1.3325 as the underling target (61.8%) later on. 1.3940 as initial resistance now and then 1.4020. Look for 1.3769/1.3683 as further targets once 1.3844 is negotiated along the way to the 1.3325 ultimate target.

FX Regime model: No Signals
Trade of the day: Short GBP/NOK - in the end, Norway is a safe haven.