FX WEEKLY REPORT, February 11, 2008

Group of Seven officials, warning of further financial-market turmoil, indicated they'll be forced into more interest-rate cuts and tax reductions to shore up the global economy.

Finance ministers and central bankers ended a weekend meeting in Tokyo with a statement that ``downside risks persist,'' including the U.S. housing slump and tighter credit conditions. Without proposing specific remedies, the group pledged ``appropriate actions, individually and collectively.''

The speed at which the American credit-market collapse spread to other parts of the world demonstrates the need for greater communication and coordination, U.S. Treasury Secretary Henry Paulson said. More than $6.7 trillion has been wiped off the value of global stocks since the beginning of the year.

Bank of Canada Governor Mark Carney signaled he'll lower rates, and European Central Bank President Jean-Claude Trichet repeated that risks to Europe's expansion have increased. Luxembourg Finance Minister Jean-Claude Juncker, who represents the 15-nation euro region, said some European countries have room to cut taxes or increase spending.

G-7 officials also discussed measures to tighten oversight of financial markets without reaching agreement, and kept pressure on China to allow the yuan to appreciate.

The euro rose against 12 of the 16 most-traded currencies after European Central Bank President Jean-Claude Trichet said ``economic fundamentals are sound'' and that no policy makers are calling for interest rate cuts.

The euro also gained for a second day against the dollar, paring its 2 percent loss last week, after Group of Seven officials released a statement warning of risks to growth from a U.S. housing slump and financial market losses.

The Australian dollar rose and government bonds fell after the central bank said it is likely to raise interest rates from an 11-year high to curb inflation. New Zealand's dollar also gained.

Australia's currency was the best performer of the 16 most- traded as the central bank in its quarterly statement said inflation was ``uncomfortably high,'' prompting traders to increase bets policy makers will raise rates from 7 percent as soon as next month. The Australian and New Zealand dollars also advanced as the extra yield of the nations' two-year bonds over similar-maturity Treasuries widened to the most in two decades.

TECHNICAL OUTLOOK – DAILY CHARTS

EUR/USD

Resistance: 1.4670

Support: 1.4355

Sentiment: mixed

GBP/USD

Resistance: 1.9765

Support: 1.9340

Sentiment: mixed to bullish

AUD/USD

Resistance: 0.9100/0.9200

Support: 0.8885

Sentiment: bullish

USD/JPY

Resistance: 108.65 

Support: 105.70

Sentiment: mildly bullish

USD/CAD

Resistance: 1.0125

Support: 0.9865

Sentiment: bearish

USD/CHF

Resistance: 1.1175

Support: 1.0865

Sentiment: mixed

GPB/JPY

Resistance: 212.60

Support: 203.90

Sentiment: bearish