The trading week has been rife with concerns. Phrases like retreating stocks, declining carry trades, and global credit crunch filled analysts’ reports, as risk aversion based on the weakening U.S. dollar led investors out of speculative markets and into safer financial harbors, such as Treasury notes. Stocks slid in both the Asian and United States markets while commodity prices soared, with oil reaching an all-time high of U.S. $90 per barrel and gold at $770 per ounce.

Despite high gold prices and the soft dollar, the Australian and New Zealand dollars both declined against the U.S. dollar and the yen, with volatile daily swings of 100 pips not uncommon.

The AUD/USD daily chart has been climbing in a steady trend since early to mid August but closed Friday, 19 October at 0.8935, down from highs above 0.9050 set on 15 October. If the currency pair breaks below initial support of 0.8871, or trend line support at 0.8819, this slide could reach the area of 0.8500. On the other hand, any sustained break above 0.9000 could renew the climb.

The U.S. dollar continues to soften. A substantial reduction in Federal interest rates is anticipated at the end of this month. Along with the poor housing market and overall decelerating economic growth since August, as reported in the newly-released Beige Book and reflected by lowered earnings in investment banking incomes, the overall outlook for the USD is not good.

Word on existing home sales is out next Wednesday, 24 October. Expect the downward trend to continue in that sector.

With the Euro remaining steady against this backdrop, the EUR/USD pair continues bullish, setting record highs this week at 1.4311 but closing at 1.4285. Initial resistance stands at 1.4250, but if the pair breaks through, a climb to 1.4500 is certainly conceivable. Any sustained drop below 1.4016 indicates a change of trend.

Record highs in oil prices fueled the Canadian dollar’s appreciation against the USD, with a return to parity possibly becoming a long-term goal in these economic circumstances. The weekly USD/CAD chart shows a particularly strong bearish trend, with RSI levels below 6, although momentum indicators rise with the shorter-term charts.

The daily USD/CAD chart shows a strong descending price channel since 16 August, dropping from 1.0865 to the current close at 0.9760. Should oil prices continue their relentless assault on new highs, and should Tuesday’s Canadian retail price announcement not interfere with the bearish trend, the channel could easily continue dropping.

The same stock slippage that contributed to losses for the AUD and NZD pushed the yen higher against many currencies, including the USD and the EUR. The momentum does not appear to be strong, but a yen rally seems to be expected by most analysts, especially should stocks continue to decline.

With UK retail sales positive in September, the pound sterling remains steady. The USD/GBP continues range-trading between strong support at 1.9682, set in June and affirmed in mid August, and resistance at 2.0456, although the price channel appears to be narrowing, with a break above resistance necessary to return to the target of 2.0651.