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[IMAGE] Forums Discuss these points in the Forums: Forexnews Forum T= echnicals Live Charts Analysis available from: Cornelius Luca J.P. Chorek= Technical Research Ltd. Charts & News featuring Standard & Poor's = Interest Rates US: Japan: Eurozone: UK: Switzerland: 2.5% 0.15% 3.7= 5% 4.5% 1.75-2.75% [IMAGE] =09 [IMAGE] USD Rally Tires and FX Mark= et Steadies Before ECB Meeting October 24, 7:00 AM: EUR/$..0.8929 $/JPY..1= 22.72 GBP/$..1.4257 $/CHF..1.6565 USD Rally Tires and FX Market Steadies B= efore ECB Meeting by Jes Black At 2:00:00 PM US Oct Fed Beige Book (exp n/= a, prev n/a) Event: At 10:00 AM US Treasury Secretary Paul O'Neill due to t= estify on the semi-annual FX report before the Senate Banking Committee At = 6:45 PM Fed Chairman Greenspan scheduled to speak on globalization at the I= nstitute for International Economics. European majors got a break on Wedne= sday as currencies looked oversold against the dollar after heavy losses ov= er the past week. Investors took profit from the dollar's rise to multi-wee= k highs and shied away from taking new long positions ahead of tomorrow's E= uropean Central Bank meeting. On Tuesday, heightened fears over new anthrax= threats reminded markets of the risks to the US economy, and gave a good r= eason for a minor correction. EUR/USD rose to a session high of 89.44 in Eu= ropean trade, up from an overnight 6-week low of 88.70, but lackluster trad= e failed to push the dollar significantly lower. Sterling rose over one cen= t from overnight 9-week lows just below 1.42 to a session high of 1.4306. H= owever, there was no real enthusiasm to take out new long positions in the = European currencies after the recent bout of losses against the dollar, and= the still prevailing sentiment favors the prospects of the US economy over= Europe and Japan. Bank of Canada's surprise 75 bp cut on Tuesday is likel= y to make the ECB look like Ebenezer Scrooge tomorrow. The bold move won ap= proval from FX traders who pushed the Canadian dollar higher across the boa= rd. The boldness also stands in sharp contrast the ECB's contention that it= needs to worry about inflationary concerns and not growth. The cards are d= efinitely stacked against the ECB, but the bank has been resisting the pres= sure. However, whether or not they do cut rates tomorrow is uncertain becau= se the ECB is know for wrong-footing the market. Correspondingly, economis= ts polled by Reuters are split over the outcome of the ECB meeting, but mos= t expect the central bank to trim its rates by at least a quarter point by = the end of next month. Therefore, a 25 bp cut has already been priced into = the market, which makes the prospect for a euro rally insignificant were th= e ECB to lower rates by just 0.25%. A more surprising 50 bp cut would trigg= er a substantial rise in the euro, possibly above the 90-cent figure. But t= hat appears to be an unlikely outcome because ECB member remarks over the w= eekend gave the impression the bank was in no hurry to lower rates. In the = absence of a cut, EUR/USD is expected to fall, targeting yesterday's low of= 88.70 followed by the 88.25/50 area on its way to 87.25, the 61.8% Fibonac= ci retracement of this year's uptrend from 83.45 to 93.35. Preliminary dat= a from 3 German states on Tuesday suggested that the national inflation rat= e is falling towards the ECB's 2.0% target, while data from Italian cities = suggested the overall Italian inflation rate is on course to slip to 2.5% i= n October from the prior month's 2.6%. As expected, today's data from Germa= ny showed import prices declined further to -3.6% y/y in September from -0.= 9% last month. This bodes well for the inflation outlook in the Eurozone bu= t may not sway the European Central Bank to cut rates this Thursday. Unfor= tunately for the central bank, both the market and member economies are cal= ling for a rate cut. That is what caused a bout of euro selling on Monday a= nd Tuesday to a 6-1/2 week low of 88.70 cents. However, the ECB does not li= ke being put in the position where its independence is questioned, and that= is another reason the bank is likely to hold off on cutting rates tomorrow= . In the meantime, trading appears subdued as dealers brace themselves for = either ECB action or inaction. European money market rates were also steady= in lackluster trade as dealers held their books closed ahead of the decisi= on. Dealers also waited on the sidelines ahead of a speech by US Treasury = Secretary Paul O'Neill later in the day. O'Neill is due to testify on the s= emi-annual FX report before the Senate Banking Committee at 10:00 AM, and m= arkets are acutely aware of the risks to the dollar if the strong dollar = policy is brought back into question. Chairman Greenspan is also scheduled = to speak at 6:45 PM on globalization at the Institute for International Eco= nomics. Sterling dropped sharply from highs around 1.43 to a European sess= ion low of 1.4259 following the CBI Q3 report showing business confidence a= mong UK manufacturers plummeted to its lowest in three years in October. Th= e latest quarterly industrial trends survey is the first where all the resp= onses came in after last month's attacks on the United States, and the CBI = cautioned that confidence could be unduly influenced in the short term by s= uch dramatic events. Expected orders balance fell to -25 vs +1 in July. Mon= thly total orders fell -33 vs -31 in September. The business optimism balan= ce fell to -54 in October from -22 in the last survey. The CBI also called = for a 50 bp cut from the Bank of England, the first time in three years the= CBI has called for such a large rate cut. USD/JPY rose to a session high = of 122.82 but failed to break heavy profit-taking orders above 122.80 yen. = USD fell from overnight highs around 123 JPY and traded most of the day abo= ve support at 122.50. Stop-loss sell orders were thought to be lined up bet= ween 122.00 to 122.20 yen, which would push the dollar lower if triggered. = EUR/JPY broke out of the 108.50 to 109.50 range, as it hit a session high o= f 109.67. However, the cross is likely to remain trading sideways if the eu= ro cannot maintain its gains above the 89-cent mark. Dealers will also loo= k to see if Wall Street enjoys Wednesday better than it did yesterday in th= e face of earnings reports for Q3. So far, 85% of the companies reporting m= atched or exceeded projected earnings targets. Today's lineup before the be= ll are Honneywell, Viacom and Kodac, and very few key companies are reporti= ng after the bell. Both Dow and Nasdaq futures are in positive territory. = After the market close, the Fed will release the October Beige Book after = no release in September. Dealers will look to see if it points to continued= economic weakness or if new orders for manufacturing is picking up. Manufa= cturing continues to be the primary drag on the regional economies, and the= beige book noted in the July report that the impact has spread to other in= dustries. Recall that it was this report that sparked this summer's decline= in the dollar. =09[IMAGE] Audio Mkt. Analysis Dollar Gives Back Gains Aft= er More Anthrax Articles & Ideas The US Dollar: Before and after the= Crisis EURO: German IFO Will Remind ECB to Build Growth Articles &= Ideas Forex Glossary Economic Indicators Forex Guides Link Library = [IMAGE] =09 =09=09[IMAGE][IMAGE] [IMAGE][IMAGE]=09 =09=09 This e-mail is never sent unsolicited. If you wish to unsubscribe f= rom this or any other Forexnews.com newsletters, please click here . =09
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