Analysis

	Currency Market Summary of May 5th, 2008.

The decision by the US FRS to reduce the interest rate by 25 basic points resulted in massive purchases of the dollar against the Euro, yen and the Swiss franc. On Friday both the ECB and the Bank of England are expected to leave their rates unchanged. Meanwhile the Euro broke through the key resistance level of 1.55 and showed the minimum at 1.5361. Currently the Euro bulls are attempting to break through 1.55 from below and apparently this will occur by Thursday. After the ECD decision, unless there are some surprises, the Euro is not likely to show a strong growth. However, a rapid decline to 1.50 shouldn’t be expected either. The most likely scenario is a small correction from the last week low followed by a downward trend. The downward trend goal is at 1.5250. The upper resistance is at 1.5570 and 1.5720. The British pound did not follow the Euro trend and remained above the key support of 1.9660. Prior to that, the pound trend was just the opposite – the Euro was raising and the pound was declining. When the Euro finally got corrected, the pound did not fall. Moreover, it went up upon reaching the support of 1.9660. This new correlation appeared in mid-April. This resulted in the long-expected correction in the Euro-pound cross-rate. It went down from 0.81 to 0.7766. As stated in the previous summary, the dollar together with the Swiss franc reached the 1.05 point and went higher to trade at 1.0609, which indicates a significant potential for the further growth to 1.07-1.0760 after a correction to 1.05- 1.0450. The dollar has been strengthening in relation to the Japanese yen for three months in a row, having gone up by a thousand points from the March low of 95.74 to 105.71. The key resistance of this trend is 106.60, which corresponds to the 38% Fibonacci correction from 124.14 to 95.74 yen per dollar. If this level is immediately overcome, the next resistance will be the mark of 110 yen per dollar. Next week may be quite interesting. More than once over the last 12 years this period brought about strong developments in the main currency rates. There are reasons to believe that the dollar will continue strengthening after a small correction.