Asia Session 09/19/2007

Published: September 19, 2007 11:27 PM

It seems like it was days ago that the world waited in anticipation for the release of the Fed�s interest rate decision but it was only yesterday. The past 24 hours has seen consolidation in both the dollar and the JPY crosses. EUR/USD remains poised to test the 1.4000 level and EUR/JPY is settling around the 162.00 level. Sideways movement after a large move as we saw yesterday could be a setup for continuation lower in the dollar and higher in the JPY crosses.

Commodity currencies were leaders in Asia as both AUD/USD and NZD/USD rallied through yesterday�s highs. USD/CAD which has been exceptionally weak as it eyes 1.0000 did not move lower but we continue to see selling pressure on rallies. Could they be leading another move lower in the dollar?

Looking forward, we have a relatively light economic calendar to end a highly dramatic week. Given the consolidation in many currency pairs one might expect the dollar to continue lower and the JPY crosses higher. Taking a step back, it seems like the market has easily forgotten its August woes but will the Fed�s interest rate cut bring liquidity back into credit markets and reverse the trend in housing as well as a potential economic slowdown? The lag in monetary policy is typically at least six months so is the market getting ahead of itself? We�re not so sure things are back to normal just yet.

Upcoming Data Releases (London Session):

Switzerland: (2:15am ET) Trade Balance previous 1.57 billion (relevance: medium).

UK: (4:30am ET) Month over month Retail Sales expected .1% vs. previous .7% (relevance: high).