Expert Analysis of Today's Market

• The dollar declined against key currencies but rose versus the pound on Tuesday before the release of the Federal Reserve’s September minutes. The yen rose as European officials tried to talk up the yen. Luxembourg Prime Minister Jean-Claude Juncker, saying the yen should reflect Japan’s economic growth, warned about one-way risks in carry-trades. The dollar-block currencies rose.


• The EUR/USD advanced today after two days of consolidations on Friday’s better-than-forecast US job growth. The pair made a short-term peak as the 6-week bull-trend was broken. There is support at the 1.40- handle. A relatively positive US employment situation and a growing view that the Fed may not cut interest rates later this month have pressured the pair.

• After falling to an all-time-low on September 28, the dollar index has since recovered modestly. The index may rise further and test the 80-area resistance. It will be difficult to penetrate this important resistance as it is the previous important lows and upper channel from the long-term bear-trend. When the bear-trend is broken, the dollar bear-market will be over; however, the US fundamentals need improving before the bear-trend may occur.

Financial and Economic News and Comments

US & Canada

• US September retail sales rose at the slowest pace in 5 months. Sales at stores open at least 12 months increased 2.0% y/y, the International Council of Shopping Centers and UBS Securities LLC said.

Europe

• German exports rose a stronger-than-expected 3.0% m/m in August after falling 0.3% m/m in July, the Federal Statistics said. German imports rose 5.6% m/m.


• German industrial output rose a stronger-than-forecast 1.7% m/m in August following a 0.2% m/m increase in July, the Economy and Technology Ministry said. August’s industrial output rose 5.1% y/y.


• European Central Bank President Jean-Claude Trichet, addressing a committee of the European Parliament in Brussels today, urged politicians to be “disciplined” when discussing currencies.


• “China and other emerging-nation economies should introduce more flexibility in their exchange-rate management,” European Union Monetary Affairs Commissioner Joaquin Almunia said.

Asia-Pacific

• Australian businesses confidence fell to an 8-month low in September on concerns global financial market turmoil and an interest-rate increase may slow economic growth. The sentiment index dropped 3 points from August to 7, according to a National Australia Bank Ltd. survey.


• An economy watcher survey on Japan’s current conditions fell more than expected to 42.9 in September from 44.1 in August.

FX Strategy Update