Sharp Change In Euro Sentiment

The US dollar continues to fall against the Japanese yen on Monday as risk aversion grows and institutional traders unwind their carry trades. People don’t really want to keep their money in stocks anymore; after all global stocks just keep sliding down. Europe’s Dow Jones Stoxx 600 index fell the most since the 9/11 terrorist attacks and sank into a bear market; Hong Kong’s Hang Seng index had its biggest drop in six years.

Elsewhere, USD gained strongly against the Euro, Franc and Pound, but not because of USD strength, rather, because of growing weakness in Euro and Pound.

The risk of European companies defaulting rose to a record today on speculation credit-rating cuts at bond insurers such as Ambac Financial Group may trigger forced asset sales. ECB’s Nout Wellink said economic growth in the region may slow more than policy makers had expected.

EUR/USD’s nearest support is around 1.4440. If this is broken successfully, next downside targets are possibly around 1.4400, 1.4360, 1.4330.

Forex moves will be volatile in thin trading as US markets are closed for the Martin Luther King Day holiday Monday.

Tuesday:Bank of Japan rate decision

Swiss adjusted real retail sales 0815 GMT

Canada retail sales 1330 GMT

Bank of Canada rate decision 1400 GMT (rate expected to be cut from 4.24% to 4%)

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