FOREX NEWS                                                              Newsforex.Net

The yen is up against majors after inflation data in Japan revealed national figures for August remained at decade highs, with headline at 2.1% as expected and Tokyo’s more timely September inflation figures bumping higher than expected.

Matt Robinson, economist with Moody’s economy.com said while the numbers for Tokyo are surprising and potentially market-moving, they take a back seat to events in the United States.

“Currency markets are probably looking at the U.S. more than anything,” he said.

On Thursday, it was announced that there is a possible alternative to Paulson’s $700 billion plan on the table from the Republicans that would involve tax cuts to free up private capital.

House Financial Services Committee Chairman Barney Frank responded that he was “puzzled” by the alternative plan and said he sees a delay of a week or more should Republicans embrace it.

On Monday next week, Japanese markets will be receiving retail sales numbers for August, expected to decline by 0.2% against July’s flat reading.

The U.S. dollar was down 0.46 to 106.10 against the yen.

Making broad-based gains on Thursday afternoon, the Canadian dollar is maintaining its hold on the U.S. dollar pending the official approval of the U.S. bailout package.

The Canadian dollar is up 0.0035 to 0.9664 against the U.S. dollar as reports have recently surfaced that Democrats and Republicans have come to a tentative agreement on a plan to help resolve the current crisis in financial markets.

“Details are still trickling out, but the main sticking points - caps on executive compensation and Congressional oversight of Treasury actions - are in the deal. The real meat of the deal will be announced after officials sit down with Treasury Secretary [Henry] Paulson and his staff, but this has taken a large degree of uncertainty on the financial side out of the market,” wrote ScotiaMcLeod wealth adviser Andrew Pyle. He warned that the deal doesn’t mean that the U.S. economy is instantly healed, but represents at least a temporary reprieve from the financial crisis of the past year.

The CAD/USD’s session high of 0.9708 is the highest the cross has been since Aug. 4. The cross has gained 4.5 cents over the past seven business days.

TD Securities chief currency strategist Shaun Osborne wrote that downward USD/CAD (1.035) pressure remains despite three failed tests of the 1.03 support level.

“USD/CAD remains contained in a 1.03/1.04 range; we continue to see downside risks for funds. EUR/CAD is looking heavy again this morning and we retain a medium term bearish bias. CAD/JPY is poised to test pivotal resistance in the low 103 zone,” he wrote, saying a clear CAD/JPY break targets 107.

The euro is down 0.0073 to 1.5113 against the loonie which, in turn, is up 1.100 points to 103.2650 against the yen. The pound sterling is down 0.0200 to 1.8979 against the Canadian dollar, which is up 0.0029 to 1.1571 against the Australian dollar.

CAD/USD up 0.0035 to 0.9664.
EUR/CAD down 0.0073 to 1.5113.
CAD/JPY up 1.10 to 103.2650.
GBP/CAD down 0.0200 to 1.8979.
CAD/AUD up 0.0029 to 1.1571.

Democrats and Republicans have come to a tentative agreement on a bailout plan to help resolve the current crisis in the financial markets, which would add confidence to equity markets, traders say.

“We have also agreed on the creation of an oversight body and foreclosure aid,” said Senate Banking Committee Chairman Christopher Dodd, speaking to reporters at the U.S. Treasury Department in Washington.

Senate and House members from both parties stood together on Capitol Hill displaying their unity on the agreement.

“Taxpayers are getting help in this, it should send a positive signal to markets,” said Dodd.

Market participants said they are expecting the plan to provide a strong boost to equity markets.

Jimmy Tintle, futures broker at Transworld Futures.com, said the approval of the plan could lead to a strong rally in S&P futures which could test the 1,300 level. He added the question is how long will the rally last.

“If this thing passes I think we could see S&P futures test 1300. I think we will get foreign investors coming back into the market that could push us to 1300,” he said.

The EUR/USD is just off session lows of 1.4561 after a 0.0076 drop on reports that there is an agreement between the Democrats and Republicans on the framework of the financial sector bailout.

The euro has since partially pared those losses and is now down 0.0025 to 1.4597 against the dollar.

National Bank of Canada director of FX George Androulidakis said in an interview he is expecting the announcement of the bailout to be dollar positive in initial reaction but midterm it could be dollar negative as the plan could lead to rising inflation. As for the plan not passing, Androulidakis said that just isn’t an option right now.

“The dollar is up because there is positive sentiment in Wall Street,” he said. “I think right now it has to be dollar positive because the alternative would be dollar and economic negative.”

Looking at trading ranges, Androulidakis said with the recent moves coming there is a fairly wide trading range in the EUR/USD. He said he will be focused on resistance of 1.4950 USD and support at 1.4550 USD. Citigroup FX strategists are advising clients to go short on the EUR/USD on any signs of strength up to 1.5000.

“For now, we are retaining our 1.3500 target that lies between 2 key Fibonacci levels on the weekly chart,” they wrote. “However, market weakness has the distinct potential to take price action into the 1.3000 / 1.3300 support area, which includes an important psychological level (1.3000), and 2 important Fibonacci levels (weekly 61.8% target: 1.3312; monthly 38.2% target: 1.3192).”

The greenback is generally mixed in the foreign exchange market. The U.S. dollar is up 0.77 to 106.88 against the yen and down 0.0040 to 1.0347 against the Canadian dollar.

A higher loonie regained some degree of humility as it dropped modestly against the greenback on Thursday morning despite softer-than-expected U.S. new home sales figures.

New home sales in the U.S. were reported to have dropped 11.5% in August to an annual pace of 460k, down from an upwardly revised pace of 520k in the prior month.

The Canadian dollar is up 0.0051 to 0.9680 against the U.S. dollar, but off session highs of 0.9708 reached at 9:30 a.m. EDT.

ING Financial Markets’ Rob Carnell confirmed in a research note to clients that the data was indeed as bad as it seemed.

“US new home sales data generally needs taking with a large pinch of salt, but the 11.5% mom fall in August cannot be shrugged off lightly,” he wrote. “For a market that is apparently [stabilizing], [these] figures suggests that we need to be cautious before we call an end to the misery in the housing market. Moreover, with sales flopping again, the months of supply outstanding have risen back to their previous high of 10.9. Further intense price pressure therefore [remains]to be worked out of the system before this market can be said to have troughed.”

Furthermore, reports have surfaced from Reuters that the Democrats have accepted the financial-sector bailout bill and that they are now taking it to the Republicans.

The euro is up 0.0020 to 1.5206 and the pound sterling is down 0.0011 to 1.9167 against the Canadian dollar. The Canadian dollar is up 0.280 points to 102.4450 against the yen and up 0.0015 to 1.1557 against the Australian dollar.

CAD/USD up 0.0051 to 0.9680.
EUR/CAD up 0.0020 to 1.5206.
CAD/JPY up 0.28 points to 102.45.
GBP/CAD up 0.0110 to 1.9012.
CAD/AUD up 0.0015 to 1.1557.

A pair of U.S. reports showing a weakening labour market and declining spending on big ticket items pulled down the U.S. dollar on Thursday. But market participants remain focused on the Troubled Asset Relief Program.

U.S. jobless claims rose to their highest level in six years and orders for durable goods tumbled 4.5% in August.

Economists say claims were distorted by bad weather.

“This looks horrible but the Labor Department reckons the impact of Hurricanes Ike and Gustav added about 50K to claims, a bit more than we expected,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics. “Together with the distortions caused by extended benefits, we just don’t know what is happening to the underlying trend in claims. It is certainly not good, but it is equally certainly not as bad as this headline suggests.”

The 4.5% decline in durable goods orders was worse than the 1.9% decline expected. Excluding transportation, orders fell 3.0% in the biggest decline since Jan. 2007. The consensus estimate was for a 0.5% decline. In addition, July’s ex-transportation figure was revised from +0.7% to +0.1%.

Fixed income strategist T.J. Marta from RBC said the decline is “a clear symptom of the credit freeze and a clear sign that the Wall Street mess has already become a Main Street one.”

Treasuries rallied somewhat and equity futures briefly sold off after the data points but the moves were short-lived with most market participants instead choosing to focus on the TARP

Soaring U.S. jobless claims and weak durable goods orders are helping to push down an already bearish U.S. dollar on Thursday morning.

Initial claims for unemployment benefits in the United States soared to 493k in the week ending Sept. 20, their highest level since Sept. 2001. Economists had expected to drop to 450k. Continuing claims climbed to 3.542 million. Durable goods excluding transportation posted another weak result in August, falling 3.0% despite forecasts for a 0.5% decline, according to the Department of Commerce. Total new orders were even more disappointing, falling by 4.5% against expectations of a 1.9% loss.

The U.S. dollar is down 0.28 to 105.84 against the yen and down 0.0071 to 1.0316 against the Canadian dollar. The USD/CAD had been at 1.0326 before the data came out at 8:30 a.m. EDT and on a marked downtrend from 1.0363 levels at 8:10 a.m. EDT.

“A daily close below the strong support level at 1.0343 would amplify the corrective tendencies that are present in USD/CAD. Resistance at 1.0414 and 1.0546 is expected to contain rallies for the time being - with a clean break below 1.0343 targeting 1.0202,” wrote RBC Capital Markets chief FX technical analyst George Davis.

The Australian dollar is up 0.0067 to 0.8410 against the greenback. The euro is up 0.0093 to 1.4714 and the pound sterling was up 0.0114 to 1.8580, all against the U.S. dollar. The EUR/USD had been at 1.469 and the cable at 1.8570 before the data came out.

“Overall, this is a very weak report,” wrote HFE chief U.S. economist Ian Shepherdson. “One month does not make a trend but the ISM is consistent with core orders falling by about 1/2% per month. Industry is in trouble.”

USD/JPY down 0.28 to 105.84.
EUR/USD up 0.0093 to 1.4714.
GBP/USD up 0.0114 to 1.8580.
USD/CAD down 0.0071 to 1.0316.
AUD/USD up 0.0067 to 0.841.

After peaking following a better-than-expected GfK Group consumer confidence reading, the EUR/USD is significantly lower on Thursday morning against all major foreign currencies.

The consumer confidence indicator surprised to the upside in October, rising to 1.8, according to a report published by the research firm. Economists had expected no change to September’s pre-revised figure of 1.5, later revised to 1.6.

The euro is now up 0.0057 to 1.4678 against the American dollar, off session highs of 1.4769. The cross had been at 1.4710 levels when the data came out at 2:10 a.m. EDT.

Citigroup’s Stephen Halmarick acknowledged the euro’s recent gains against the greenback, but said such upward momentum is likely to be temporary.

“With ongoing huge uncertainties regarding the measures by U.S. authorities to improve financing conditions, the euro probably will continue to be volatile and might strengthen further against the US dollar in the near term,” he wrote to clients. “However, we continue to expect a significant weakening of the EUR against the USD in coming quarters (to 1.30 by mid-2009 and 1.20 at the end of next year), because of a prolonged period of weak GDP growth and accompanying lower interest rates in the euro area.”

The euro is down 0.0016 to 1.5170 against the Canadian dollar and up 0.30 points to 155.44 against the yen. The EUR/CAD had risen 0.0058 to session highs of 1.5296 on the GfK survey. The EUR/JPY similarly increased 0.44 points to session highs of 155.98 on the data before moderating and then dropping to current levels.

The GBP/EUR fell 0.022 to 1.2610 following the data, but RBC Capital Markets global head of FX strategy Adam Cole argued that the survey wasn’t the main market-mover overnight

The Australian dollar is up against most majors, including the U.S. dollar, after a report released from the Reserve Bank of Australia gave an upbeat assessment.

The bank’s semi-annual financial stability review said the Australian economy was better poised than most to deal with the global economic crisis, with a “soundly capitalized” system.

The report read “large Australian banks all have high credit ratingsÂ¥and credit standards in Australia have no been eased to anywhere near the same extent as in the United States.”

The Aussie has been on a steady climb upwards during the Asian session. Still, Patricia Gacis, strategist with ANZ Markets, pointed out the Aussie is retaining “narrow ranges as focus remains squarely on developments in the US.”

Tomorrow, there are no releases out of Australia, and markets will surely turn their focus to developments out of the U.S. on the $700 billion Treasury bailout plan that George Bush advocated on national television Wednesday night.

The euro was up 0.0033 to 1.7558 against the Australian dollar.

The Australian dollar was up 0.0021 to 0.8364 against the greenback