At overnight lows Monday, near $1.4908, the euro was off 7.1% from the life-time high of $1.6040, seen only July 15. Last week's historic 5.60 cent slide was "the biggest on record since the euro was introduced...," says Andy Chaveriat, technical analyst at BNPParibas. The decline can be put in context "by noting that it was larger than the trading range of Q1 2007 and Q2 2007," he says. Monday, the euro gapped lower at $1.4930 in Wellington - and this gap, "a rare event", seems "to be an exhaustion gap marking completion of the collapse beginning Thursday ($1.5502/$1.4908)," Chaveriat says. He warns to watch the pivot at $1.4990/1.4998 (Friday's low/Asian twin high). If support holds, "followed by a rise above $1.5085 (Ldn high), then today's rise will be impulsive, suggesting scope to extend towards the upper end of the $1.5135/$1.5208/85 corrective target zone during the next few days," Chaveriat adds.

The stock market continues to rally, as oil posts a 1.9% loss. Buying interest is mostly broad-based, with exception of commodity stocks.
The financial sector (+3.4%) is seeing a notable gain. Within the sector, 80 of 88 stocks are higher, led by a 6.0% rally in Wells Fargo (WFC 31.98, +1.81). Fannie Mae (FNM 8.74, -0.31) and Freddie Mac (FRE 5.79, -0.11) are the main laggards, but have made a sharp recovery off session lows.
The S&P 500 Retailing Index advances 8.1%, marking its largest percent gain in seven and a half years. All 29 members of the index are in positive territory. By percent gain, the leaders are Gap (GPS 20.51, +2.42), up 13.4%, Dillard's (DDS 12.27, +1.42), up 13.1%, and Amazon.com (AMZN 89.72, +9.21), up 11.4%. This session's advance sends retailers to a 0.6% gain for the year.
The energy sector (-2.0%) and materials sector (-1.8%) fall to fresh session lows. Precious metal mining companies are under pressure as the price of gold tumbles 4.0% and silver falls 4.3%.

The metall is marginally off the lows of the day thus far marked at $821.40. Trades presently at $826.00, down from an early US level at $860.50.
On Friday, the precious metal bottomed out around $850.50.

The stock market runs into some resistance at its recently reached session high, but still sports a solid gain of nearly 1%.
Small-cap stocks are outperforming, with the Russell 2000 Index up 2.2%. Small-cap stocks typically garner more buying interest as investors show more willingness to take on risk. The Russell 2000 is down 2.0% this year, compared with the S&P 500's decline of 10.9%.
As stocks advance, Treasuries decline. The 10-year note is down 22 ticks, and the 30-year bond is down 45 ticks.

The dollar rose to a 5 1/2-month high against the euro on speculation the economic slowdown that started in the U.S. is spreading and as oil prices dropped.
`We clearly have weaker growth outside the U.S.,'' said Benedikt Germanier, a currency strategist at UBS AG in Stamford, Connecticut, in an interview on Bloomberg Television. ``That's enough for the dollar to sustainably gain ground in relative terms.''
The European currency sank the most in almost eight years against the dollar on Aug. 8 as traders pared bets the ECB will raise interest rates as the economy slows. Last week's decline was the most since January 2005.
French industrial production unexpectedly dropped 0.4 percent in June, the National Statistics Office reported today in Paris. The median forecast of 24 economists surveyed by Bloomberg News was for an increase of 0.6 percent. The yen and the Swiss franc rose against most of the other major currencies as concern the global economy is weakening led investors to reduce holdings of higher-yielding assets and pay back low-cost loans in Japan and Switzerland.

Rate revisited the overnight lows at $1.9126 in recent trade but fails to penetrate the level as earlier mentioned layer of demand interest at $1.9130/20 provides an effective cushion and as crude oil claws back some of it recent losse. Bids remain to $1.9120, further interest ahead of $1.9100.

Break below $114.60 seen extending weakness to $111.80 -- key barrier in March and potentially $111.10, which is the value of a downward channel line from July 8. However, this is a falling target with not much significant support until $109.47/72, where the former is the 61.8% retracement of the 2008 rally and latter the 200-DMA.

Stocks jumped Friday, with the Dow industrials gaining over 300 points, as oil prices lost almost $5 a barrel to trade at three-month lows and the dollar rallied against other major currencies.

Earlier, Canadian housing start fell 14% m-o-m to 186,500 vs a downwardly revised 215.9k in June, which was well below the 12-mos avg at about 225k, says Stewart Hall of HSBC. He notes however that "geographically, the decline was nearly entirely centered in Ontario, where until construction was nearly halved," which suggests that there is "something other than economics at work." Ontario has had its rainiest summer in decades, which may explain the magnitude of the construction decline, he says. "Given a softening real estate market, the initial interpretation" of the data, "will be to lump it predominantly at the feel of a softening Canadian economy on which there is little to debate," Hall says.

The stock market trades with a slight gain, with five of the ten economic sectors in positive territory. The Nasdaq is outperforming, partially due to strength in Amazon.com (AMZN 86.29, +7.78).
Food products company Sysco (SYY 31.24, +1.37) is posting a solid 4.6% advance. Sysco said its latest quarterly earnings rose 12% year-over-year to $0.55 per share, which topped Wall Street's forecast of $0.52. The company's results were aided by the ability to keep operating expenses in check.

Traders attribute bounce in crude oil prices from earlier lows on back of short-covering. WTI Nymex crude oil is currently trading at $115.20, unchanged on session.

USD/JPY gets close to Y109.96 after falling to lows around Y109.50. Bids on approach to Y109.60/50, Y109.30. Offers around Y110.20/25, Y110.40/50.

The stock market recovers to the unchanged mark in mixed trade. Six of the ten economic sectors are posting a loss, led by weakness in materials. Telecom (+1.2%) is outperforming.

Retailing stocks (+1.2%) are a pocked of strength this morning. Online giant Amazon.com is leading the way, after Citigroup said sales of Amazon appear to be much stronger than expected.

Retailers will be an area of focus throughout the week, with earnings reports from JCPenney, Kohl's, Nordstrom, TJX Cos and Wal-Mart.

USD/JPY: Y110.00, Y109.75, Y109.55, Y108.70
AUS/JPY: Y98.00
GBP/USD: $1.9390
EUR/GBP: stg0.7900

GBP/USD backs above $1.9200, as rate moves higher in tandem with euro-dollar, which it self edges back above $1.5000. If cable can build on this recovery seen opening a move toward $1.9220.

Stock futures rose early Monday, lifted by the momentum from the previous session's big rally, but higher oil prices kept a lid on gains.

Stocks ended last week with solid gains Friday. The blue-chip Dow surged 300 points, buoyed by another sharp drop in oil prices and gains made by the dollar.
Corporate deals: Trash hauler Waste Management is expected to raise its unsolicited cash offer for rival Republic Services by nearly 10% to $6.73 billion, the Wall Street Journal reported.
Verizon Communications and two unions agreed on a new three-year contract Sunday, averting a possible strike of 65,000 workers.
Warren Buffett's Berkshire Hathaway reported an 8% decline in second-quarter profit after the market close Friday. The investment group said it collected fewer insurance premiums and recorded $1 billion in unrealized derivative losses.

WTI Nymex crude oil under pressure. Support is at Friday's low at $114.62 and break sees little to underpin until the 200-day moving average at $109.73. WTI Nymex crude oil is at $115.00, down 20 cents.

EUR/GBP holding steady around stg0.7808 after printing session highs on stg0.7838. Bids remain in place at stg0.7800/0.7795, a break below to open a deeper move toward stg0.7780 ahead of stg0.7765/60. Offers noted toward stg0.7840, stronger on approach to stg0.7850.

GBP/USD holds above $1.9200 with reported demand interest in the area between $1.9200/1.9185. If rate can push higher again expected to meet resistance from above $1.9250, with main offers noted between $1.9270/80. Earlier talk had placed stops above $1.9270.

The following data were issued
06:00GermanyWholesale prices (July) 1.4% - 0.9%
06:00GermanyWholesale prices (July) Y/Y 9.9% - 8.9%
06:45FranceIndustrial production (June) -0.4% 0.4% -2.9 (-2.6)%
06:45FranceIndustrial production (June) Y/Y- -1.2%
08:00ItalyCPI (July) final0.5% 0.5% 0.5%
08:00ItalyCPI (July) final Y/Y 4.1% 4.1% 4.1%
08:00ItalyHICP (July) final Y/Y 4.0% 4.1% 4.1%
08:30UKPPI (Output) (July) unadjusted 0.4% 0.5% 0.9%
08:30UKPPI (Output) (July) unadjusted Y/Y 10.2% - 10.0%
08:30UKPPI Output ex FDT (July) adjusted 0.3% - 0.3%
08:30UKPPI Output ex FDT (July) unadjusted Y/Y 6.7% - 6.4%
08:30UKPPI (Input) (July) adjusted -0.6% 1.0% 2.1%
08:30UKPPI (Input) (July) unadjusted Y/Y 30.1% - 30.3%
08:30UKTrade in goods (June), bln -7.7 -7.4 -7.4 (-7.5)
08:30UKNon-EU trade (June), bln -4.7 -4.0 -4.0

Just because the dollar posted its biggest gain against the Euro in almost eight years doesn't mean the U.S. currency won't continue to be plagued by the nation's slowing economy, widening budget and trade deficits and negative inflation-adjusted interest rates.
The 4% surge against the single European currency this month was enough to prompt Bank of America Corp. to tell its customers to exit trades betting on more gains. Morgan Stanley still forecasts the greenback will approach a record low by October as the U.S. housing slump and credit-market losses keep the Federal Reserve from raising interest rates this year.

EUR/USD opened in early Europe around $1.4963 after falling to the lows around $1.4908. Release of a hawkish interview with ECB Liebscher provided the added impetus to take rate back above $1.5000, peaking at $1.5083 before settling around $1.5000/10. Bids $1.5000, $1.4980. Offers $1.5080/85, $1.5100/10.

GBP/USD opened early Europe at $1.9163. Cable dropped to $1.9140, as rate tracked euro-dollar, recovering in line to $1.9200. Hawkish ECB Liebscher comments boosted euro-dollar's recovery, pulling cable along to $1.9256.

USD/JPY opened in Europe at Y110.10 before set stable between the Y109.70/90 range. Dollar-yen bids Y109.60/50, Y109.30. Offers Y110.20/25, Y110.40/50.

Government reports this week may show retail sales fell 0.1 percent in July, the first decrease since February, and the U.S. trade deficit widened in June to $62 billion from $59.8 billion. The U.S. budget deficit, which totaled $163 billion for 2007, is forecast by the administration of President George W. Bush to widen to a record $482 billion for 2009.

USD/JPY: Y110.00, Y109.75, Y109.55, Y108.70
AUS/JPY: Y98.00
GBP/USD: $1.9390
EUR/GBP: stg0.7900

The euro recovered after a European Central Bank policymaker made hawkish noises about interest rates, reigniting speculation rates could rise again in the euro zone after all. Klaus Liebscher, an ECB governing council member and outgoing governor of Austria's central bank, has said there is "no room for complacency" on euro zone interest rates and high inflation.
The comments conflict with those of central bank president Jean-Claude Trichet, who surprised markets on Thursday by giving a dire growth outlook for the euro zone, leading markets to write off any chances the ECB might raise interest rates again soon, having increased them by a quarter-point to 4.25% in July.
Liebscher's comments helped to reverse partially the heavy losses the euro has suffered since Thursday, which had pushed the single currency down to a near-six-month low against the dollar to below $1.50.
Elsewhere, the pound was steady after official data revealed pipeline inflationary pressures in the United Kingdom did not rise quite as quickly as markets expected in July. The Office for National Statistics said output prices rose 0.4% from June and jumped 10.2% from a year earlier, the highest annual rate since comparable records began in 1986 but better than forecasts for a 0.6% monthly rise and an annual increase of 10.3%.

WTI Nymex crude oil is paring overnight gains on wire reportsthat crude oil transportation is continuing through the Baku-Supsa pipeline. WTI Nymex crude oil is now at $115.89.

Resistance 3: Y111.70
Resistance 2: Y111.00
Resistance 1: Y110.40
Current price: Y109.92
Support 1: Y109.70
Support 2: Y108.80
Support 3: Y107.70
Comments: USD/JPY set stable, holding within the upward channel from Jul 15, limited today by Y108.80/Y111.70 (strong support and resistance respectively). Strong resistance comes at Y110.30/40 (overnight highs). Above dollar may rise up to 5-days channel line on Y111.00/10. Lower bound of the channel is at Y109.70 (support). Below losses may widen to Y108.80 and then - to Y107.70 (Aug 05 lows).

Resistance 3: Chf1.1040
Resistance 2: Chf1.0940
Resistance 1: Chf1.0850
Current price: Chf1.0774
Support 1: Chf1.0760
Support 2: Chf1.0680
Support 3: Chf1.0520
Comments: Friday USD/CHF broke above the resistance line from Jul 15, that today comes at Chf1.0760 (strong supprt). Below correction may bring the rate down to Chf1.0680/90 (50% of Chf1.0520 - Chf1.0850 increase) and then – to Chf1.0520 (last Thursday's lows). Resistance is around session highs on Chf1.0850, above the focus will turn to the trend line from Mar 17 2008 at Chf1.0940/50.

Resistance 3: $1.9400
Resistance 2: $1.9340
Resistance 1: $1.9260
Current price: $1.9232
Support 1: $1.9130
Support 2: $1.9080
Support 3: $1.8820
Comments: Cable tries to recover after last week's sell-off. Rate tested strong support this morning at $1.9130 (50% Fibo of $1.1.7060 - $1.1180 rise). Below key support comes near trend line from Jan 2002 on $1.9080/00. Break under will change the veiw on pound and open the way to $1.8820 (2006 Dec 12 lows). Minor resistance is around $1.9260 (session high). Above there is a chance of testing the $1.9330/40 zone (50% of the decline from last Thursday's high on $1.9540 to Friday's lows). Key level is around upper nound of the downward channel from Jul 31 at $1.9400.

Resistance 3:$1.5400
Resistance 2: $1.5300
Resistance 1: $1.5180
Current price: $1.5065
Support 1: $1.4910
Support 2: $1.4860
Support 3: $1.4800
Comments: Euro rise above $1.5000. Nearest support comes at $1.4910 (Session low). Below at $1.4860 and $1.4800. Resistance comes at $1.5180. Strong level is $1.5300 and $1.5400.

Small react dip on release of UK trade and PPI met willing buyers as rate gets another lift on the back of continued euro-dollar demand. Rate eased from $1.9235 to $1.9225, bouncing to $1.9256. Offers now seen placed between $1.9270/80.

USD/JPY Y109.75, Y108.00
GBP/USD $1.9390
EUR/GBP stg0.7900

EUR/USD
Offers: $1.5070/80

USD/YPY

USD/CHF

AUD/USD

The euro fell to a five-month low against the dollar as fighting between Russia and Georgia spread to a second front, raising concern about stability in Europe.
The 15-nation currency also declined to a two-month low versus the yen as armed conflict heated up in Georgia's separatist Abkhazia region after Russian troops took control of the breakaway province of South Ossetia. The Australian currency extended three weeks of losses after the nation's central bank reiterated that it may lower interest rates in its quarterly statement on monetary policy. Central bank Governor Glenn Stevens said last week there was ``scope to move toward a less restrictive stance of monetary policy'' because of slowing consumer demand.
Gains in the dollar may be limited by speculation the world's largest economy will slow as high energy prices crimp consumer spending.
Sales at U.S. retailers fell 0.1 percent in July after rising 0.1 percent in the previous month, according to the median estimate. The Commerce Department will release the data on Aug. 13.
``I would not chase the dollar's strength versus the euro as the pair has moved beyond interest-rate support,'' said Sophia Drossos, a strategist in New York at Morgan Stanley, who also recommended closing out bets on the dollar versus the currencies of Malaysia and Singapore. ``The dollar is not out of the woods. It will take the market a while to come around to our point of view.''
Futures on the Chicago Board of Trade show a 40 percent chance the Fed will raise its target rate at least a quarter- percentage point by year-end and a 90 percent probability of higher borrowing costs by the end of March.
EUR/USD consolidated within the $1.4915-$1.5000 range before it printed session high on $1.5084.
GBP/USD consolidated within the $1.9125-$1.9230 range .
USD/JPY consolidated within the Y110.35-Y109.60.

Japanese share prices gained ground on Monday helped by a rally in U.S. stocks on Friday and with exporter stocks leading gains. The benchmark Nikkei 225 index ended higher by 261.44 points, or 1.99%, at 13,429.85.

Commodity markets staged a broad-based retreat last week, with oil prices tumbling below the $115 level while base metals and gold all saw mounting selling pressure. Crude oil fell below $115 a barrel for the first time since May as the dollar gained the most since 2001 against the euro, reducing the appeal of commodities as an inflation hedge. Oil dipped to $114.62 a barrel as prices for commodities including metals and crops fell amid the dollar's gain. Crude has declined more than $32 from its July record on speculation that slower global economic growth will cut demand.

The report from the U.S. Energy Department also dragged the rices for oil down. It showed U.S. crude-oil supplies rose 1.61 million barrels, or 0.6%, last week. Gasoline supplies fell 4.34 million barrels, or 2%, to 209.2 million barrels, the biggest drop since April. Crude oil may extend declines next week amid weakening demand caused by a global economic slowdown, a survey of analysts showed.

Wall Street stocks rallied strongly on Friday, and made their first consecutive weekly gains since May, after a dip in oil prices offset weak results and a dividend cut from Fannie Mae. Over the week, the S&P 500 climbed 2.9% for its biggest gain since April. A rapid decline in oil prices, a swathe of earnings reports that were for the most part positive and a decision by the Federal Reserve to leave its benchmark interest rate unchanged at 2%, all played a part. The Dow rose 3.6% over the week while the Nasdaq gained 4.4%.

The dollar strengthened to $1.5005 to the euro last week, the biggest weekly increase on a percentage basis since January 2005. It surged 2.08% on Aug. 8, touching $1.4998, the most since Sept. 4, 2001, and the second largest rally since the euro was introduced in 1999. In addition to the gains against the euro, the dollar also appreciated 2.3% versus the yen, the most in eight weeks. The euro lost 1.29% against the Japanese currency, the biggest drop in 13 weeks.

Resistance 3: Y112.50
Resistance 2: Y111.30
Resistance 1: Y110.40
Current price: Y109.95
Support 1: Y109.90
Support 2: Y109.60
Support 3: Y109.10
Comments: Although intra-day sharp selloff from 110.40 due to active cross-buying in yen suggests recent strong upmove has made a temporary top. Key resistance level is around at Y111.30 and Y112.50. Stronger support level is around at Y109.90. Below the decline may extend Y109.60 and Y109.10.

Resistance 3: Chf1.1040
Resistance 2: Chf1.0930
Resistance 1: Chf1.0850
Current price: Chf1.0825
Support 1: Chf1.0780
Support 2: Chf1.0670
Support 3: Chf1.0635
Comments: Outlook is similar to euro, although dlr has opened higher after Friday's rally and marginal gain above 1.0850. Next resistance comes at Chf1.0930 (Feb 25 high). Break above will target Chf1.1040 (Feb 18 high). Below correction may extend to Chf1.0780 and Chf1.0670. Stronger support on Chf1.0635 (Aug 07 high).

Resistance 3: $1.9415
Resistance 2: $1.9270
Resistance 1: $1.9215
Current price: $1.9170
Support 1: $1.9120
Support 2: $1.9080
Support 3: $1.9000
Comments: Cable has fallen in tandem with euro. Break under $1.9120 will widen losses to $1.9080 and then – to $1.9000. Resistance comes at $1.9215. Above there is a chance for a rise to $1.9270. Strong zone comes at $1.9415.

Resistance 3:$1.5100
Resistance 2: $1.5060
Resistance 1: $1.5000
Current price: $1.4965
Support 1: $1.4910
Support 2: $1.4860
Support 3: $1.4800
Comments: Euro has opened lower following Friday's selloff and although recent decline may extend marginally to 1.4910. Below at $1.4860 and $1.4800. Resistance comes at $1.5000, then $1.5060 and $1.5100.

Australia's central bank said the economy looked to be slowing enough to significantly reduce inflation over time, providing growing scope to ease interest rates from 12-year highs. The Reserve Bank of Australia (RBA) gave little guidance on when it might cut rates but did warn that the deteriorating outlook for the world economy, made worse by the global credit squeeze, could be a serious risk to the economy at home.
RBA: "While inflation is likely to remain high in the short term, the Board judged at its August meeting that demand was slowing to an extent that could be expected to bring about a significant reduction in inflation over time."

High Low Close
EUR/USD 1.5334 1.4996 1.5016
USD/JPY 110.35 109.27 110.19
GBP/USD 1.9438 1.9144 1.9200
USD/CHF 1.0836 1.0607 1.0805

EUR/JPY 167.79 165.27 165.49
EUR/GBP 0.7897 0.7810 0.7819
GBP/JPY 212.72 210.81 211.16
GBP/CHF 2.0779 2.0603 2.0748Change % Change Last
Nikkei 225 +141.88 +1,08% 13,168.41
Topix +1.12 +0,09% 1259.93
DAX 30 +18.16 +0.28% 6,561.65
САС 40 +34.42 +0.77%   4,491.85
FTSE 100 +11.70 +0.21% 5,489.20
Dow +302.89 +2.65% 11,734.32
Nasdaq +58.37 +2.48% 2,414.10
S&P +30.25 +2.39% 1,296.32
10YR +0.1500 +0.038% 3.950%
OIL NYMEX -4.82 -4.18% 115.20
Gold -13.10 -1.51% 864.80

06:00 Germany Wholesale prices (July) 0.9%
06:00 Germany Wholesale prices (July) Y/Y 8.9%
06:45 France Industrial production (June) 0.4% -2.6%
06:45 France Industrial production (June) Y/Y -1.2%
08:00 Italy CPI (July) final 0.5% 0.5%
08:00 Italy CPI (July) final Y/Y 4.1% 4.1%
08:00 Italy HICP (July) final Y/Y 4.1% 4.1%
08:30 UK PPI (Output) (July) unadjusted 0.5% 0.9%
08:30 UK PPI (Output) (July) unadjusted Y/Y 10.0%
08:30 UK PPI Output ex FDT (July) adjusted 0.3%
08:30 UK PPI Output ex FDT (July) unadjusted Y/Y 6.4%
08:30 UK PPI (Input) (July) adjusted 1.0% 2.1%
08:30 UK PPI (Input) (July) unadjusted Y/Y 30.3%
08:30 UK Trade in goods (June), bln -7.4 -7.5
08:30 UK Non-EU trade (June), bln -4.0 -4.0
23:50 Japan Corporate goods price index (CGPI) (July) domestic 0.8%
23:50 Japan Corporate goods price index (CGPI) (July) domestic Y/Y 5.8% 5.6%