Weekly Outlook for Forex

September 29, 2008

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General Market Comments:

Markets continue to be focused on the bailout. We will of course get some kind of a deal done this week and calmer heads should ensue after that. We are of now of course seeing banks fail across the pond. With England taking over one of their largest banks it is clear that this is a global issue and as we have mentioned in past issues, not even close to over yet. We expect to see more of these failures in the weeks to come, however in the long run European banks will fare better than US banks and therefore we continue to sell dollars on rallies like we are seeing early this week.

Europe
Euro, Pound, Swiss Franc

EUR/USD:
This pair fell mostly in sympathy with the Cable after news of the banks failure. After the “shock” of this is over we expect to see this pair continue to move higher and are therefore buying into this dip.

GBP/USD:
News of Bradford & Bingley failing sent the cable into a free fall. Even so, the British banking system is in much better shape when compared to the U.S. and therefore we are buyers of this dip.

USD/CHF:
This pair is expected to continue to move lower again as the Swissy is a bit of a safe haven, much like gold, in times of uncertainty. We are sellers of rallies this week, and frankly we see parity being tested sometime by early 2009.

ASIA

Yen, Australian Dollar

USD/JPY:
This pair remains frozen relative to the other majors. We expect that freeze to begin to thaw this week. We are buyers of major dips as once a deal get done we expect to see both this pair and stocks moving higher.

AUD/USD:
This pair also fell in sympathy with the cable but overall we remain bullish and continue to buy dips, so long as .7750 holds.

North America

Canadian

USD/CAD:
This pair is moving back towards parity as we expected and mentioned in past issues. We are looking for rallies to sell into this week.

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