Cutrrency strategists at UBS are setting a tactical long in euro-dollar around current levels, ($1.5417) ahead of the ECB meeting and press conference, with a target in mind of $1.5700. They argue that the market has pushed euro down too quickly and, while European economic data has taken a turn for the worse, "the hard facts have not yet changed, i.e., a turn of the "ECB's needle in its compass" - which is inflation standing at 4% (ECB's target is below 2%)." Thus it is hard to imagine the ECB turning dovish at this time, they say. Stop is at $1.5280.

The major indices climb to session highs, thanks to mostly broad-based buying interest. The Dow and S&P 500 are posting slight gains, and the Nasdaq is up nearly 1%.
Despite the -0.5% drop in crude prices, the energy sector is up 1.2%, which is helping to offset the financial sector's decline of 1.0%.
The majority of this session's biggest percent losers are related to earnings reports. Freddie Mac (FRE 6.71, -1.33) is posting the largest decline of 16.5% in response to its large $821 million second quarter loss, and Fannie Mae (FNM 11.93, -1.67) is down 12.2% in conjunction with the news. Whole Foods (WFMI 19.94, -2.98) plummeted 13% after the company posted 23% year-over-year drop in earnings per share and suspended its dividend.
Sprint (S 7.45, -1.10), Dean Food (DF 21.89, -1.44) and News Corp (NWS.A 14.27, -0.98) are also among the session's big percent losers in response to their respective earnings reports.

Holding $1.5420 after morning lows at $1.5395 and now apparently sliding into the ECB vigil ahead of Thursday's rate decision and press conference that follows. Bids remain to $1.5380, resistance appears at the $1.5440 area.

The S&P 500 encountered resistence at the unchanged line yet again. The Dow has slipped into the red, but the Nasdaq continues to trade with a healthy gain.
The materials sector is outperforming the other sectors, though it is off its best level of the session. It is currently up 1.2% after being up as much as 2.2% earlier.
The sector is posting an advance even though more sector members are trading with losses than gains. Considerable influence is coming from heavyweight Freeport McMoRan (FCX 86.76, +7.76). Shares of FCX are jumping following the stock's steady descent since July's end.

Steven Ricchiuto, VP at Handelsbank, says consensus has pushed out the timing of econ rebound into Q2 or Q3 2009. The growth optimists continue to say "a lack of excess inventory, a narrowing trade deficit, and a healthy non-financial corporate sector balance sheet assure that the economy will be able to avoid a full fledged recession." The pessimists look at "high energy prices, deteriorating labor market conditions and a broadening out of the credit crunch." He says the longer credit problems continue, the worse the outcome.

The S&P 500 briefly touches positive territory before retreating a bit as crude oil prices recover. Crude is now down 0.2% to $118.82 per barrel, a substantial rebound from recent lows when it was down down as much as 1.7%.
The S&P 500 and Dow are now posting very slight losses, while the Nasdaq continues to sport a gain.

The yen fell to the lowest since January against the dollar after Japan's government said the economy is ``deteriorating,'' acknowledging for the first time that the country's longest postwar expansion has probably ended.
``The Japanese economy is slipping into a recession,'' said Hidetoshi Yanagihara, senior currency trader at Mizuho Corporate Bank in New York. ``The concern is that Japanese interest rates are too low. This is one major reason people are selling the yen.''
Euro remains under pressure as investors speculate ECB will keep its key interest rate at a seven-year high of 4.25 percent tomorrow, according to the forecasts of economists. ECB President Jean- Claude Trichet will hold a press conference after the rate decision tomorrow in Frankfurt.
Trichet said on July 3 that he had ``no bias'' or ``pre- commitment'' after policy makers increased the main refinancing rate a quarter-percentage point.
``The ECB will send the message that they will keep the neutral stance,'' said Matthew Strauss, a senior currency strategist at RBC Capital Markets Inc. in Toronto, a unit of Canada's biggest bank by assets. ``The risk is that they will acknowledge that growth is coming down faster than expected.''
Factory orders in Germany, adjusted for seasonal swings and inflation, declined 2.9 percent from May, the Economy Ministry in Berlin said today. That's the biggest drop since July 2007.
``I would call it a bluff if the ECB remains hawkish,'' said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York. ``Their growth numbers are pointing south. The ECB has to step away from their rhetoric eventually. The dollar is an attractive currency right now.''

The major indices climb to session highs, in mostly broad-based buying interest that is led by large-cap tech. The Nasdaq and Dow are now in positive territory. The S&P 500 is down -0.1%, which is a respectable recovery from its session lows of -0.8%.
The tech sector is at session highs with a gain of 0.8%. Large-cap tech leads the way, with strength in Cisco (CSCO 24.07, +1.42), Microsoft (MSFT 26.93, +0.72) and Apple (AAPL 163.80, +3.16).

July IVEY PMI at 65.5 vs consensus at 61.0, came in better than expected, says Stewart Hall of HSBC. "The question to ask is what is contributing to this uncharacteristic spate of purchasing activity?" he says. Labor problems in the auto sector idled someOntario vehicle manufactures and may have "played havoc with the typical summer shutdown schedule" which in turn affected purchasingactivity. The data suggests a stronger overall economy, Hall says. However, he reminds that the IVEY does not always correlate well withthe overall economy. Market focus now shifts to Friday's July unemployment report. HSBC looks for the unemployment rate to rise to 6.3% from 6.2%, with consensus looking for unchanged. HSBC sees a drop of 10,000 in terms of job losses, in line with consensus.

The pare piersed through the layered stops around Y109.30 area and printed high at Y109.40 as the dollar got fresh wind from tumbling oil prices. Area of Y109.50 now seen as a technical resistance ahead of Y110.00.

The major indices lift off their session low in a mostly broad-based recovery effort. The tech sector (+0.6%) is leading the charge higher, which allows the Nasdaq to climb to positive territory. The Dow and S&P 500 are now posting a slight loss.
The stock market's recovery comes as crude quickly drops to a 1.4% loss at $117.53 per barrel as traders continue to digest the government's weekly inventory data. As a result, the energy sector (+0.1%) is trading near the unchanged mark.
The telecom sector (-2.1%) is not participating , as it falls to a session low. Shares of Sprint Nextel (S 7.62, -0.93) are down 11% after the struggling wireless communication company reported second quarter results disappointed investors. Earnings per share fell 76% year-over-year as revenue fell 11% due to subscriber loss.

In typical fashion, crude prices trade in a volatile manner following the government's weekly energy data. Prices briefly dropped into negative ground, before recovering to a gain of 0.2% at $119.35 per barrel. The unexpected drop in crude stockpiles was partially offset by a larger-than-expected decline in gasoline inventories.
The stock market falls to a fresh session low and then recovers a bit. Financials (-2.0%) and consumer discretionary (-1.8%) are the main laggards. The energy (+1.1%) and materials (+1.6%) sectors continue to provide leadership, but have fallen off their session highs of 1.8% and 2.2%, respectively.
The materials sector is benefiting from a strong 8.8% advance in shares of mining company Freeport McMoRan (FCX 85.94, +6.94). FCX was added to Citigroup's Top Picks Live list, noting an attractive valuation. FCX tumbled 22% during the last five sessions on concerns of decreasing copper prices (+1.3%).
The energy sector is getting a boost from Devon Energy (DVN 91.16, +2.26). The independent gas and oil company posted a 79% year-over-year increase in earnings per share, which topped Wall Street's expectations.

Crude contract slips about $0.50 to $119.25.

The stock market continues to trade with a modest loss, as eight of the ten economic sectors are in negative territory. The two best-performing sectors in yesterday's session -- financials (-1.9%) and consumer discretionary (-1.4%) -- are the main laggards this session.
Conversely, the two worst performing sectors yesterday -- energy (+0.9%) and materials (+2.0%) -- are providing leadership this session.
Crude oil prices are up 0.5% to $119.74 per barrel after dropping nearly 5% in the two previous sessions.

Weighed by the relentless lift of dollar-yen that adds to the consensus for a stronger greenback across the board, euro is trading down to $1.5410 area now but running into some modest demand interest ahead of the figure

Barrier at Y109.00 and reported stops at Y109.05/10 now reduced to history as high prints are notched at Y109.24. Offers eyed at Y109.30.

EUR/USD $1.5490, $1.5400, $1.5650/55
USD/JPY Y108.50, Y108.20, Y108.75, Y107.25, Y107.00
GBP/USD $1.9730
EUR/GBP stg0.7930

A lackluster start to the trading day is expected (S&P futures -5.9, Nasdaq futures -3.5). Asset management firm Blackstone reported second quarter earnings of $0.15 per share, which is $0.07 better than Wall Street's forecast.
Crude oil is trading up 0.2% to $119.37 per barrel ahead of the government's weekly energy inventory report at 10:35 ET.
Cisco is 4.2% higher in premarket trading after topping expectations in its latest quarter. The company issued revenue guidance for the next two quarters that was slightly below consensus, but reiterated its long-term growth guidance of 12% to 17%. Freddie Mac is down roughly 10% in premarket trading. The company reported a second quarter loss of $1.63 per share and cut its quarterly dividend to $0.05 or less from $0.25. In other earnings news, Sprint Nextel, Time Warner, Dean Foods, Devon Energy all topped expectations. Bond insurer Ambac and Whole Foods missed estimates.

The only significant data on the US calendar for today is the weekly crude oil inventory report (14:35 GMT). Platts survey shows expectations for:
Crude oil inventories down 1.2 million barrels
Gasoline inventories down 1.4 million barrels

2Q loss of Freddie Mac - $821mln/$1.63 per share, vs -$151mln in 1Q. 2Q provision for credit losses $2.5bln vs $1.2bln in 1Q. Freddie Mac cut 3Q dividend to 5c/share vs 25c.

UBS says they now expect Q4 real GDP growth to be -0.5% and they cut Q4 2008 to Q4 2009 real GDP estimate to 2.2% from 2.8%. The catalyst was diminished household wealth spurring weaker consumption. UBS says the move will be a U-shaped rather than a V-recovery.

The euro rose, rebounding from a seven-week low against the dollar, on speculation European Central Bank President Jean-Claude Trichet will signal higher interest rates may be needed to combat inflation.
The 15-nation currency also advanced against the yen before the ECB's meeting tomorrow, at which it's forecast by analysts keep its key interest rate at 4.25 percent.
``The risk for tomorrow is that the ECB will come across as more hawkish than the market is expecting,'' said Adam Cole, head of global currency strategy in London at Royal Bank of Canada. ``Commodities prices may be falling, but it's the second-round effect that policy markers are worried about. In the near-term, that should provide some support for the euro.''
The single currency pared gains after factory orders in Germany, the region's largest economy, unexpectedly fell in June, increasing the likelihood Europe's largest economy contracted in the second quarter.
The inflation rate for the euro region rose to 4.1 percent in July, the fastest pace in more than 16 years, more than double the pace ECB targets.
Traders pared bets yesterday that the Fed will raise interest rates by year-end. Futures on the Chicago Board of Trade showed a 46 percent chance the Fed would increase its target lending rate by at least a quarter-percentage point on Dec. 16, down from 73 percent on Aug. 4.
``They are clearly not signaling tightening,'' said Benedikt Germanier, a currency strategist at UBS AG in Stamford, Connecticut. ``The dollar has already gained some ground. While commodities continue tanking, the rally can last a little bit longer here.''

EUR/USD: Has extended the high to $1.5515. Euro-dollar then eased back under $1.5500, a US investment house the noted seller on the way down. The move extended under $1.5470, with added sell pressure coming from disappointing German manufacturing data. Offers $1.5520/25, stronger $1.5545/55, stops above, bids $1.5450.

GBP/USD: Sterling stil holding around $1.9520/80

USD/JPY: Round of buying late in the morning pushed dollar-yen to a seven-month high above Y108.60. Offers Y108.80/90, stops Y109.05/10, bids Y108.25/20.

The Canada’s Ivey Purchasing Managers Index is due at 14:00 GMT. Also today will be published at 14:35 GMT EIA Crude Oil Stocks change of USA.

Resistance 3: Y111.40
Resistance 2: Y110.00
Resistance 1: Y108.70
Current price: Y108.50
Support 1: Y107.30
Support 2: Y106.00
Support 3: Y105.40
Comments: The dollar has established new session high against yen. Resistance is around sessions high on Y108.40. Strong resistance comes at Fibo level on Y110.00 (50% of the move from Jun 2007 highs at Y124.10 to Mar 16 lows on Y95.70). 100 points higher the next band of resistance is – near channel line on Y111.40. Strong support is near Y107.30 (23.6% of Y103.70 - Y108.30/40 rise). Below losses may widen to 50% Fibo on Y106.05/00, then – near channel line on Y105.40.

Resistance 3: Chf1.0720
Resistance 2: Chf1.0640
Resistance 1: Chf1.0560
Current price: Chf1.0524
Support 1: Chf1.0430
Support 2: Chf1.0320
Support 3: Chf1.0240
Comments: Dollar corrects after yesterday’s rally. Resistance comes at yesterday’s highs on Chf1.0560. A bit higher there is stronger level on Chf1.0640 (upper bound of the upward channel from Jul 15). Break above will open the way to Feb lows on Chf1.0720. Strong support comes at channel line on Chf1.0430 (also 23.6% Fibo of Chf1.0012 - Chf1.0560 rise). Below correction may dip to Chf1.0320 (Jul 25-27 lows) with a break under will open the way to Chf1.0240.

Manufacturing orders (June) adjusted -2.9%
Manufacturing orders (June) seasonally adjusted Y/Y -8.4%
Manufacturing orders (June) unadjusted Y/Y -6.1%

Resistance 3: $1.9860
Resistance 2: $1.9760
Resistance 1: $1.9630
Current price: $1.9550
Support 1: $1.9520
Support 2: $1.9460
Support 3: $1.9370
Comments: Sterling stil holding around. Resistance comes at yesterday’s highs on $1.9630. Back above will target Monday’s highs on $1.9760, then – on $1.9860 (21-days MA). Key support zone around session low on $1.9520 with stronger – at $1.9460 (Jun 05 low and lower bound of 6-days channel). Strong support comes near $1.9370/65 (Jan, Fen and May lows).

Resistance 3:$1.5800
Resistance 2: $1.5760
Resistance 1: $1.5670
Current price: $1.5475
Support 1: $1.5440
Support 2: $1.5360
Support 3: $1.5280
Comments: Techs on euro hasn’t changed. Resistance comes at $1.5670 (38.2% of $1.6030 - $1.5440 decline). Above the target comes near channel line from Jul 15 on $1.5760. Break above will bring the rate up to $1.5800/10 (61.8%). Strong support is around yesterday’s lows near channel line from Jul 15 on $1.5440. Break under will accelerate euro’s decline to Jun 05 lows on $1.5360. Stronger support is around $1.5280 (May-June lows).

The euro rose, rebounding from a seven-week low against the dollar, on speculation European Central Bank President Jean-Claude Trichet will signal higher interest rates may be needed to combat inflation.
The 15-nation currency also advanced against the yen before the ECB's meeting tomorrow, at which it will keep its key interest rate at 4.25 percent, according to a Bloomberg News survey of economists. Australia's dollar declined to a four- month low and Canada's currency traded near its weakest in almost a year as prices of commodities the nations export fell.
The inflation rate for the euro region rose to 4.1 percent in July, the fastest pace in more than 16 years, more than double the paceECB targets.
The U.S. dollar held near seven-week highs against the yen as oil tumbled to the lowest level in three months, supporting economic growth prospects in the world's largest consumer of the fuel.
Oil has lost more than $28 since touching a record of $147.27 a barrel in New York on July 11 as unprecedented fuel costs prompted U.S. consumers to limit spending.
``The U.S. dollar should continue to be buoyed,'' said Tsutomu Soma, a bond and currency dealer in Tokyo at Okasan Securities Co. ``The fall in oil is a plus for the U.S. At the same time, it encourages the withdrawal of funds from the commodity currencies.''

EUR/USD rise to $1.5515 from session low at $1.5448.

EUR/USD $1.5490, $1.5400, $1.5650/55
USD/JPY Y108.50, Y108.20, Y108.75, Y107.25, Y107.00
GBP/USD $1.9730
EUR/GBP stg0.7930

«World growth slowing, against that backdrop, US earnings are likely to decline by more than is priced into equity markets, and earnings disappointments likely will continue to pressure stock prices. Fed on hold with the risks between growth and inflation more balanced than at the last FOMC meeting in June."

Resistance 3: Y111.40
Resistance 2: Y110.00
Resistance 1: Y108.40
Current price: Y108.39
Support 1: Y107.30
Support 2: Y106.00
Support 3: Y105.40
Comments: Dollar still holds within the upward channel from Jul 18, limited by Y105.40/Y111.40 (key support/resistance). Strong support is near Y107.30 (23.6% of Y103.70 - Y108.30/40 rise). Below losses may widen to 50% Fibo on Y106.05/00, then – near channel line on Y105.40. Resistance is around sessions high on Y108.40. Strong resistance comes at Fibo level on Y110.00 (50% of the move from Jun 2007 highs at Y124.10 to Mar 16 lows on Y95.70). 100 points higher the next band of resistance is – near channel line on Y111.40.

Resistance 3: Chf1.0720
Resistance 2: Chf1.0640
Resistance 1: Chf1.0560
Current price: Chf1.0517
Support 1: Chf1.0430
Support 2: Chf1.0320
Support 3: Chf1.0240
Comments: Dollar corrects after yesterday’s rally. Resistance comes at yesterday’s highs on Chf1.0560. A bit higher there is stronger level on Chf1.0640 (upper bound of the upward channel from Jul 15). Break above will open the way to Feb lows on Chf1.0720. Strong support comes at channel line on Chf1.0430 (also 23.6% Fibo of Chf1.0012 - Chf1.0560 rise). Below correction may dip to Chf1.0320 (Jul 25-27 lows) with a break under will open the way to Chf1.0240.

Resistance 3: $1.9860
Resistance 2: $1.9760
Resistance 1: $1.9680
Current price: $1.9585
Support 1: $1.9520
Support 2: $1.9460
Support 3: $1.9370
Comments: Sterling slowly rebounds, getting close to the channel line from Jul 15 at $1.9680 (broken Monday). Back above will target Monday’s highs on $1.9760, then – on $1.9860 (21-days MA). Key support zone around session low on $1.9520 with stronger – at $1.9460 (Jun 05 low and lower bound of 6-days channel). Strong support comes near $1.9370/65 (Jan, Fen and May lows).

Resistance 3:$1.5800
Resistance 2: $1.5760
Resistance 1: $1.5670
Current price: $1.5500
Support 1: $1.5440
Support 2: $1.5360
Support 3: $1.5280
Comments: Euro rebounds with resistance comes at $1.5670 (38.2% of $1.6030 - $1.5440 decline). Above the target comes near channel line from Jul 15 on $1.5760. Break above will bring the rate up to $1.5800/10 (61.8%). Strong support is around yesterday’s lows near channel line from Jul 15 on $1.5440. Break under will accelerate euro’s decline to Jun 05 lows on $1.5360. Stronger support is around $1.5280 (May-June lows).

High Low Close
EUR/USD 1.5576 1.5443 1.5449
USD/JPY 108.41 107.65 108.28
GBP/USD 1.9624 1.9520 1.9527
USD/CHF 1.0559 1.0479 1.0545

EUR/JPY 168.57 166.83 167.29
EUR/GBP 0.7940 0.7899 0.7909
GBP/JPY 212.36 210.54 211.46
GBP/CHF 2.0626 2.0537 2.0596

Change % Change Last
Nikkei 225 -18.52 -0.14% 12,914.66
Topix -0.54 -0.1% 1,247.71
CAC +105.72 +2.47% 4,386.35
FTSE +134.30 +2.52% 5,454.50
DAX +168.89 +2.66% 6,518.70
Dow +331.62 +2.94% 11,615.77
NASDAQ +64.27 +2.81% 2,349.83
S&P +35.87 +2.87% 1,284.88
10yr Note +0.3500 +0.088% 4.007%
NYMEX Crude Oil -2.24 -1.84% 119.17
Gold -21.80 -2.40% 886.10

05:00 Japan Leading indicators (June) preliminary - 45.5
05:00 Japan Coincident indicators (June) preliminary - 30.0
10:00 Germany Manufacturing orders (June) adjusted 0.5% -0.9%
10:00 Germany Manufacturing orders (June) seasonally adjusted Y/Y -4.7% 0.2%
10:00 Germany Manufacturing orders (June) unadjusted Y/Y - -2.0%
19:00 USA Consumer credit (June), bln +7.0 +7.8
23:50 Japan Machinery orders (June) adjusted - 10.4%
23:50 Japan Machinery orders (June) unadjusted Y/Y - 5.1%