Analysis

	Currency Market Summary for the week December 3rd – 7th, 2007.

If we analyze the events of the recent days, that is good information on the US economy and the resolution by the authorities to freeze the interest rates on mortgages, the possibility that the FRB will reduce the rate, has become less probable. There remains a reason of pre-emptive action, but now it is not likely to have the prevailing power over common sense. In case the mortgage interest is going to be frozen for 5 years, the addition to the rate reduction looks like an extreme encouragement of speculations.
Let’s look at the intermediate results. The forecast of the yen movement to the 107 level (see the review from 05-09.11.2007) has come true. The low was at 107.20. The same summary stated the strengthening of the downward pound trend. It was confirmed last week. The summary from November 26th-30th contained a forecast for the Euro – a reduction with the goal of 1.45 and we have observed the recent low of 1.4524.   

The current forecast for the basic currency pairs did not undergo any substantial changes. There are reasons to believe that the dollar will still show its strength and the Euro will test the recent low by the end of the year. The pound, in spite of a high inflation rate in Great Britain, will be under 2.000 but the Swiss franc will be traded within the range of 1.1120-1.1380 with the possible goal to break through its upper limit.
The dollar and the Japanese yen seem to be able to break through the key level of 112 any time, which will open the way to 112.60 and 113.54. The real outcome of this opposition of bulls and bears will become clear only on Tuesday evening. The carry trade transactions stepped out of the shade again and the cross rate of the Euro-yen has come close to the important resistance level of 164.30 - 62% of the range 167.60-158.70.
The year is coming to its end and serious changes are not likely to happen before the holidays. The mid-term trend, which started for the dollar turned, into trading in a quite narrow range of prices, the break through of which is put off till the situation with the rates clears. Even if they are lowered, which is not very probable, the dollar rate will not go down below the previously established lows, at least, this year.