*Last Updated January 30, 2006, 11:55 pm

Daily report by CMC Markets

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FOREX ANALYSIS

Fed verdict, State of the Union set to drive dollar in near term

January 31st - Consolidation may well prove to be the watchword through today’s session for currency markets as traders wait for the FOMC rate verdict. There’s still little consensus being formed as to the future direction of interest rates although there is strong agreement that we’re going to see another 0.25% added at this next meeting. Accompanying comments can however be expected to provide the greenback with some additional direction in the near term, although whether this latest run of appreciation can continue will obviously depend on the very nature of the statement. USD/JPY has now touched the 117.50 level – representing the 50% retracement of the December/January move lower - but has failed to advance through it. Many expected this line to provide a degree of resistance although with a rather mixed bag of Japanese economic data having been released overnight, there’s been little around to support anything more than a token Yen rally in the short term. The other notable item on the agenda today is tonight’s the State of the Union address and this could raise concern amongst currency traders if the threat of action against Iran takes too dominant a position – the dollar really could find itself moving significantly in either direction over the next 24hrs…

Tim Wilbraham and Enis Mehmet



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