THE STORY
As the currency of the world’s fifth largest exporter of oil, the price of the Norway Krone is heavily correlated with the price of oil. The dramatic fall in oil prices during the second half of 2008 took a toll on the NOK causing it to lose 16% against the USD. On December 19th the NOK reached an all time low against the EUR as oil slipped to a four year low of $34 a barrel.

During the month of December, the price of oil and the Norwegian Krone were in sync over 90% of the time. When oil shot up 12% on December 29th due to Israeli attacks in Gaza, the Krone followed suit gaining 3% on the USD in only one day. A further fall in oil prices will drag down the Krone but when oil retraces the Krone will strengthen.

THE NEWS
The Norges Bank completely surprised the market on December 17th with a hearty 1.75% cut in interest rates bringing the rate to 3%. They also indicated they would continue to cut rates predicting that the economy will fall into a recession during the fourth quarter of 2008. In an effort to salvage the Norwegian economy, the government will introduce an economic spending plan on January 26th.

Similar to it’s Nordic neighbor, the Swedish Krona reached an all time low against the Euro on December 24th. Over the last year the Krona has lost over 16% against the USD. To slow down the recession, Sweden’s Riksbank cut rates 2.75% since October bringing the rate to 2.0%. In an announcement the Riskbank indicated they would aggressively cut rates in 2009 as they expected the recession that started in the second quarter of this year will extent into next year. The biggest economy in Scandainavia is expected to shrink by 0.8% next year as the global financial crisis continues and exports dwindle.

To help support the economy the Swedish government is cutting income tax and extending a $5.2 billion stimulus package in 2009. Also the Swedish National Debt Office will purchase up to $1.9 billion Krona during the first quarter of 2009.

A small glimmer of hope for the Swedish economy came on December 30th when Sweden’s retail sales declined less than expected. It was anticipated that retail sales would fall 0.4% but instead retail sales only fell 0.1%.

THE RUMOR
In an interview with Bloomberg Henrik Gulberg,who is a strategist at Deutsche Bank, said that the Swedish Krona and Norwegian Krone were extremely undervalued and that once the financial market crisis subsides in 2009 there will be a strong correction in these currencies. The Swedish Debt Office also issued a statement this month that the Krona exchange rate was from the level that can be justified by more fundamental conditions and that is should be possible for the Krona to strengthen over time.

THE CHARTS



Looking at the daily chart we can see the strong up trend on the USD. NOK pair. We are trading well above our 200 day MA. Currently price is trading between the 7.3116 high of 12.04.08 and the recent swing low of 6.5367 of 12.17.08 .



Crude is sliding on the daily and can not make new highs. There is firm resistance at the 50 Ma of 50.47. The MACD indicator is showing negative divergence and is threatening to make a bearish cross.

THE TRADE

The outlook on crude is still technically bearish, with the downtrend established from July of last year still intact. If this trend continues it is feasible for the USD.NOK to reach new highs. Long trades should be considered if there is a break of recent highs of 7.0500 looking to reach 7.3000. If crude jumps above $53 or the USD.NOK forms new lows under 6.5360 we may begin to establish new short positions targeting 5.8450 our 61.8% fib retracement.

Timely News - Technically Speaking; is written by Tangie Gustin and Walker England. They can be reached for comments here on the forum.

The information contained herein is derived from sources we believe to be reliable, but of which we have not independently verified. FOREX CAPITAL MARKETS, L.L.C.® assumes no responsibility for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person’s reliance upon this information. FOREX CAPITAL MARKETS, L.L.C.® does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. FOREX CAPITAL MARKETS, L.L.C.® shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation losses, lost revenues, or lost profits that may result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results

THE STORY
Considering that Switzerland is completely engulfed by the Euro zone, it is not difficult to understand why the CHF and the EUR are so closely related. The seamless flow of money, goods, and labor between Switzerland and its Euro zone neighbors have tied these two economies together.

Historically the EUR/CHF has been a classic range bound pair that moved in fairly predicable patterns. Since the price of the CHF is bound to the EUR, the pair rarely broke out of its range and in the event of a break out was quick to return to its range. In July of 2008 the global financial crisis propelled this pair out of its existing range and into a new violent trend.

Long considered a safe haven currency, the CHF benefited from the tumultuous market conditions of 2008 and gained 6.04% against the USD. As the CHF was gaining the EUR was falling into a recession and aggressively slashing interest rates which pushed the EUR/CHF in a drastic downtrend.



This table displays how G7 currencies preformed against the USD during 2008.


THE NEWS
The ECB is expected to cut rates 50 basis points bring the rate to 2.0% at their interest rate announcement tomorrow. This ECB rate cut has already been priced into the market and a rate cut itself will not move the price of the EUR/CHF. The event risk will be the comments made by ECB President Trichet following the rate cut. If he provides any insight on future rate cuts or policy changes the market could react.

Inflation is expected to be well controlled which leaves the ECB ample room to cut rates. Tomorrow Euro zone CPI, which is a key measure of inflation, will be announced and it is anticipated to come in at 1.6% which is well below the ECBs’ comfort threshold of 2%.

Earlier today, the German GDP for the year of 2008 came in at 1.3% which is nearly half of 2007 GDP which was 2.5%. Although the GDP came in line with expectations it is a confirmation that growth in the Euro zones’ largest economy suffered during 2008 and signs of economic recovery are yet to been seen.


THE RUMOR
Inflation in the Euro zone is easing which means the ECB is likely to remain dovish as the recession pushes the EUR lower. At the same time the global recession will boost the CHF which has a safe haven status. Unless the market conditions change drastically and the global recession subsides it seems likely the EUR/CHF slide downward will continue.


THE CHARTS



The resent decline of the Eur.chf pair has recently developed a new down trend from 12/15/08 high of 1.5879. Price action has taken a bearish bias with the 100sma crossing below the 200sma on our daily chart. Long term support now rests at 1.4297 our established October low.




A 15min chart reveals that there is a negative bias in overnight trading. Currently MACD is mixed below the zero line indicating temporary market indecision. With price nearing short term support at 1.4680 bounces are possible towards 1.4720-1.4740.

THE TRADE
Trading has been relatively calm overnight with the EUR.CHF holding a tight range over the last 14 hrs. With a bearish bias on both short and long term charts we are looking to sell resistance near 1.4720. Our first target is to support at 1.4297. A break above 1.4760 would expose resistance at 1.4838.

Timely News - Technically Speaking; is written by Tangie Gustin and Walker England. They can be reached for comments by emailing info@fxcmmicro.com .

The information contained herein is derived from sources we believe to be reliable, but of which we have not independently verified. FOREX CAPITAL MARKETS, L.L.C.® assumes no responsibility for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person’s reliance upon this information. FOREX CAPITAL MARKETS, L.L.C.® does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. FOREX CAPITAL MARKETS, L.L.C.® shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation losses, lost revenues, or lost profits that may result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results.

THE STORY
Relentless selling pressure has forced the GBP to 3 decade low against JPY and it’s lowest levels against the USD since 2001 as investors question the stability of the UK banking system and the ability of the already debt burdened government to rescue the country. The selling momentum was intense this week moving the GBP over 1000 pips lower against the USD. Also the EUR is within striking distance of parity with the GBP.

Earlier this week, the Royal Bank of Scotland reported the largest corporate loss in UK history. Concerns over the UK banking system have caused the prime minister to commit an addition 100 billion GBP on top of the 250 billion GBP that has already been promised. Since the first bank rescue hasn’t halted the pace of the demise of the financial system in the UK, investors have little confidence an additional 100 billion GBP will improve the situation.
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THE NEWS
In the beginning of the month, the Bank of England cut interest rates 50 basis points to 1.5% which is the lowest rate in the bank’s history which began in 1694. The Bank of England meeting minutes released this week show that the rate cut was approved 8-1 with one member wanting to cut rates 100 basis points. At the next interest rate announcement on February 5th, the Bank of England is anticipated to cut rates another 50 basis points bringing the rate to 1.0%.

Also the CPI announced on Tuesday was 1.1% which indicates that inflation is decreasing. Considering that the Bank of England is comfortable with the CPI reaching 2%, they have ample room to cut rates in terms of inflation. However, at this point rates are already hovering near zero and the central bank governor acknowledged that policymakers need to consider using more than interest rates to save the economy.

The GDP announcement due this Friday is expected to technically prove that the UK is officially in a recession which the market has already known for months. Analysts predict that the 4th quarter GDP will come in at -1.2% which will be the second consecutive report of negative growth for the UK economy.

THE RUMOR
Most analysts agree that the UK financial system is a disaster zone and selling pressure on the GBP will only increase. In an interview this week with Bloomberg TV, Jim Rogers said “I would urge you to sell any sterling that you might have. It is finished.” Notably, Jim Roger correctly predicted the commodities rally that began in 1999 and he suggested selling the GBP in January of 2008. With the market sentiment clearly stacked against the GBP the bottom appears endless and the road to economic recovery long.


THE CHARTS



The recent slide of the gbp.jpy is clear on our monthly chart. We can see exactly how much trouble the GBP is in . This week the pair broke in to uncharted territory making 30 year lows. The last resistance has been broken at the 128.98 price level that was established back in April 1995.



A bearish short term bias is also confirmed on the Gbp.Usd 2hr chart. Price is trading well below the established 200 sma. Directional indicators are currently bearish and slowly approaching being possibly oversold.

THE TRADE
Trading has been relatively calm overnight with the EUR.CHF holding a tight range over the last 14 hrs. With a bearish bias on both short and long term charts we are looking to sell resistance near 1.4720. Our first target is to support at 1.4297. A break above 1.4760 would expose resistance at 1.4838.

Timely News - Technically Speaking; is written by Tangie Gustin and Walker England. They can be reached for comments by emailing info@fxcmmicro.com .

The information contained herein is derived from sources we believe to be reliable, but of which we have not independently verified. FOREX CAPITAL MARKETS, L.L.C.® assumes no responsibility for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person’s reliance upon this information. FOREX CAPITAL MARKETS, L.L.C.® does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. FOREX CAPITAL MARKETS, L.L.C.® shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation losses, lost revenues, or lost profits that may result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results.