The Easter-shortened financial week began on Sunday for the U.S., with the announcement of an emergency 25bps cut to the discount rate and the fire sale of Bear Stearns to JP Morgan at the used-goods price of $2/share, funded in part by the Federal Reserve and brokered in part by the U.S. Treasury. Other measures initiated included broadening the availability of Fed loans to financial institutions other than banks, for a longer length of time, and for a wider range of collateral. Although the timing of the announcement prevented blood flowing on Wall Street upon Monday’s opening, equities markets in Australasia and Europe dropped dramatically, followed later in the week by many commodities.

Coupled with the possibility that Australian interest rates have finally peaked, the sharp drop in the share market and tumbling commodity prices, including gold, crude oil, copper, and grains, dragged the currencies of producing nations lower, and AUD/USD fell 3.8% this week. A look at the daily chart shows a classic double top formation with the neckline around 0.9150, now broken, and a target price around 0.8800.

The measures taken by the Fed, including a 75bps interest rate cut on Tuesday coupled with a less dovish than expected announcement emphasizing inflationary pressures, boosted the confidence of the financial markets and supported USD against most currencies throughout the forex trading week. It is possible this week may in future be recognised as the turning point in the global financial crisis.

Speculation that credit market losses may begin to sap the Eurozone weighed on EUR/USD, although the bounce, from Monday’s record high of 1.5902 to Friday’s close of 1.5438, seems due more to Fed actions than ECB policies. The German Ifo index, released Wednesday 26 March, may be the clearest signal of future ECB moves, and should be watched closely for more than a slight drop.

The Bank of England was also active this week, on Thursday renewing its offer of emergency funding and meeting with financial executives regarding the industry’s current condition. The nation’s largest mortgage firm, HBOS Plc, denied liquidity problems a la Bear Stearns; nevertheless, the stock plunged over 15%. GBP/USD fell 1.9% as part of the dollar’s overall strengthening, dropping decisively below the resistance-turned-support level at 1.9950 on Wednesday, to end the week at 1.9826.

Leading economic indicators continue to show the U.S. slowdown infecting the Canadian economy, with a fall of 0.3% in February centred on growing weakness in housing and manufacturing. With the Commodity Research Bureau index dropping over 8% in one week, the sharpest drop in at least five decades, CAD/USD fell 3.3% in concert. This could push the currency pair from its trading range, between 0.9700 and 1.0300, established November 2007 and only spiked through since that date; and indeed, Friday’s close at 1.0236 was a bounce from that resistance level.

Even Swiss banks are not immune to the current crisis, with Credit Suisse Group reporting writedowns of US$2.65Bn and admitting a profit this quarter is unlikely. USD/CHF broke parity for the first time ever Friday week and sank to a new record low of 0.9638 on Monday, but rose above that psychological point to end the forex trading week bouncing between support at 1.0065 and resistance at 1.0172.