The EUR USD closed higher on Thursday after posting an early morning selloff that was triggered by the news that the U.S. government was developing a plan to help the beaten-up housing sector.  Reports that foreclosures were increasing along with the number of mortgages underwater is causing the Treasury to develop a plan to provide about $40 billion in homeowner aid.   The initial move in the Euro was down, but by the end of the day the market ran out of sellers.  This triggered a short-covering rally and a closing price reversal.  Although the trend is down, a closing price reversal is often indicative of a retracement of at least 50% of the last break.  Once confirmed by a follow through rally on Friday, the chart pattern indicates the strong possibility of a rally back to 1.3248.

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FINANCIALS
The December Treasury Bonds and December T-Notes are trading sharply higher.  Interest rates are dropping as traders flock to the treasuries for safety and liquidity.  

Fears of global recession, forced liquidation in equities and commodities, hedge fund deleveraging and lower than expected earnings are driving traders out of equities and into financial markets.

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ENERGIES
The announcement by OPEC to lower production by 1.5 million barrels per day had little effect on the crude oil market overnight.  The 1.5 million barrel cut was a compromise among OPEC members.  Some wanted 1 million barrels, others wanted 2 million.  This is leading to speculation that OPEC does not have a grasp of the current supply and demand situation.  This lack of unity is preventing buyers from entering the market.  Many traders feel the cut was not aggressive enough to address the situation. They feel that OPEC will have to send a much stronger signal at its meeting in December to halt the decline.  OPEC may have acted tentatively because of U.S. government criticism of OPEC’s intention to cut production in the midst of an economic slowdown.

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Welcome to Jay Norris' Forex Trend Maps, a recap of the Forex markets every Monday, Wednesday and Friday posted at 4:30 P.M. (CDT)Contact Jay at 312-896-3986 or This e-mail address is being protected from spam bots, you need JavaScript enabled to view it

October 16, 2008

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