SPOT FX VIEWS AS OF Oct 08, 2007

Euro Spot Outlook as of Oct 08, 2007

VIEW:

Spot Euro closed unchanged on Friday after showing an impressive reversal from intraday low of 1.4030. Supports are now seen at 1.4090 followed by 1.4030. Resistance appears at 1.4155 a break of which could test 1.4200.RSI is neither overbought nor oversold and continues to trade in the neutral conditions. Prices closed very near the 8-day ema at 1.4131 while the 21-day ema at 1.4026 seemed providing a firm support.  Averages in the MACD are above the zero line in the indicator suggesting bullishness; only a crossover below the zero line will indicate bearishness.

Euro showed an impressive turn around after the release of US September NFP release, which printed a generation of 110K jobs against expected 100K. The release not only did manage to beat the market expectations but also showed a huge revision of 89K from –4K in August payroll numbers. The release created a wave of profit booking that pushed the single currency significantly lower. However the market still seems to eyeing ECB action as the central bank not only failed to give their stance on inflation in statements following their interest rate decision but also avoided any comments on the negative effects of a strong Euro on export-oriented economies like Germany. In this scenario any comments from ECB officials or a line of Industrial production and factory orders releases could limit gains in Euro.

RECOMMENDATION: Favored view expects supports near 1.4110/1.4080 to hold for a breakout above 1.4155/65 region, targeting next breakout level at 1.4200.

GBP Spot Outlook as of Oct 08,2007

VIEW:

Spot GBP closed higher on Friday after a slide in Greenback reappeared. Supports are now seen at 2.0280 followed by 2.240.Resistance is at 2.0465 a break of which could test 2.0495. RSI is in neutral condition indicating prices are neither overbought no oversold and has ample room before touching the over bought region to suggest a rise. Prices have closed above the 8-day ema at 2.0349 and the 21-day ema is at 2.0265 indicating bullishness. Averages in the MACD are above the zero line suggesting bullishness; only a crossover below the zero line will indicate bearishness.

GBP followed the action in other Dollar majors after the release of US September NFP numbers. While a possibility of a rate cut by BoE before year-end is still bet on by the market, an absence of an accompanying statement with their last week’s interest rate decision has lowered these expectations. In this scenario, a string of releases including retail sales, producer prices and BoE governor King’s speech will provide market action.

RECOMMENDATION: Favored view expects supports in the 2.0400/2.0375 region to cushion dips, for a rally towards 2.0450/2.0460. A push above 2.0475 is needed to expect more gains towards 2.0510. As of now it is not clear whether it could cross above 2.0475. Stop for this bullish view is set at 2.0347

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