Sat, Nov 29 2008, 20:03 GMT
by ActionForex.com Team
Weekly Review and Outlook
Euro May Tumble in an Eventful Week on Speculations of Deep ECB Cut
Improvement of risk appetite was the main theme in the forex markets early last week as reflected with AUD/USD and AUD/JPY being the top gainers. Nevertheless, momentum in yen crosses receded as the holiday shortened week went on and upside of yen crosses are still limited by some near term resistance levels. The outlook of investors sentiments remained shaky despite the boost by announcement of various stimulus and rescue plans.
The most important development of the week was, indeed, the deterioration in Euro towards the end with Euro felling sharply across the board after sharper than moderation in consumer inflation. Weakness of Euro was most apparent in EUR/GBP as the correction from 0.8660 record high resumed and dived to as low as 0.8234. EUR/USD was sharply lower from 1.3080 to as low as 1.2464 while EUR/JPY was back pressing 121 level. Note that Nov HICP flash was at 2.1% yoy, just inch above ECB's target of 2%, thus giving ECB the much room to catch up with other major central banks around the world on cutting interest rates.
Dollar index dived to as low as 84.78 early last week but subsequent strong rebound and break of 86.43 resistance argues that such correction from 88.46 has completed. Some more strength in the greenback is in favor, probably led by weakness in EUR/USD. Also, note that Gold's rebound lost momentum after hitting 833 level. OPEC also said that they will delay cutting production this year. Any short term reversal in Gold and Crude Oil will provide further support to the greenback.
The coming week will be extremely eventful, featuring rate decisions of four major central banks, ECB, BoE, RBA and RBNZ. In addition, we'll have both ISM indices as well as Non-Farm Payrolls. Let's prepare for a roller-coaster ride in the markets.