Euro: Watch for a Break of 1.37 (page 2 of 2)

Housing market reports should be a bit softer after the drop in mortgage approvals reported yesterday.

Meanwhile keep an eye on the CBI survey since it tends to be a good leading indicator for retail sales. Both of these reports are expected to be weaker which means that the British pound could give back some of today's spectacular gains.

Yen selling resumes once again

The currency market seems to be extremely schizophrenic at the moment as they love the yen one minute and hate it the next. Over the past few days, the Japanese yen crosses have been swinging 10 to 20 pips at the blink of an eye.

This may of course be due to lower volume, but at the same time, it is also due to uncertainty. Traders are waiting for the next shoe to drop and depending upon whether that will comes in the form of another big blowup or an interest rate cut by the Federal Reserve first will determine where the yen crosses are headed next.

For the time being, we prefer to err on the side of caution and avoid jumping into the carry trade. Meanwhile Prime Minister Shinzo Abe's cabinet shakeup has helped to boost his approval ratings significantly.

For the first time since May, his approval ratings were above 40 per cent. Japanese retail sales are due for release tonight along with small business confidence. Both figures are expected to be weak.

Australian, New Zealand and Canadian dollars driven higher

Renewed demand for high yielding currencies as well as rebounding oil and gold prices have driven the Australian, New Zealand and Canadian dollars higher.

Australian new home sales and construction work data was tepid, but that seemed to matter little to the currency market. Instead traders revealed in higher oil prices after the larger than expected drop in crude inventories and in the market's overall demand for yield.

Over the next 24 hours, we are expecting a lot of data from these three countries. Australia will be reporting its current account figures, New Zealand has its money supply and business confidence data while Canada has industrial and raw material prices along with its current account balance; expect these currencies to be in play tomorrow.

Meanwhile Australia and New Zealand could weather the US slowdown better than many people may think. The Baltic Exchange's Dry Freight Index was once termed, the "Best Economic Indicator You've Never Heard Of" by Daniel Gross hit a record high today.

This indicates that there continues to be huge demand for raw materials from countries like China and India. This could provide the support that these commodity rich countries need.