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DOLLAR: The Dollar has been able to grind out a modest gain this morning, and looks to be putting together a mild recovery from the recent lows. With few US economic numbers during the early part of this week, there may be added emphasis on the release of Fed minutes later today to gauge the likelihood of quantitative easing measures being extended, or if monetary policy may be tightened during the near future. Much of the market’s focus remains on overseas issues, but the Dollar appears to be finding some benefit from generally positive US data over the past few weeks. While there may be few data points for the Dollar to find support from during the next session or two, there may be enough uncertainty from overseas issues for prices to avoid another retest of the lows over the near future. The Dollar may find resistance near the 76.40 level this morning, but is likely to consolidate near these present prices levels as outside markets continue to hold the market’s attention.
EURO: The June Euro has come back on the defensive today, and has fallen back from yesterday’s highs for the move. A credit ratings downgrade on Portugal’s sovereign debt may not be much of a surprise to the market, but that action underscores the problems that peripheral EU nations may have with the ECB starting up a series of rate hikes. Today’s Euro zone Retail Sales number was lukewarm at best, but elevated inflation levels appear to be the key economic indicator for the market to watch for during the near future. The June Euro may find support near the 141.20 level during today’s session, but this sort of price action in front of Thursday’ ECB meeting could lead to an extended move to the downside.
YEN: The June Yen has come under heavy pressure in the wake of this morning’s Chinese rate hike, and is closing in on a new low for this sell off. Ongoing problems at the Fukushima power plant remain an issue for the June Yen, as overseas assets may wait to be repatriated until the crisis has reached some sort of conclusion. The June Yen may find support near the 118.25 level during today’s session, but will need to find some positive news in order to turn this sell off around.
SWISS: The June Swiss appears to be consolidating just above the 108.00 level, showing little reaction to developments with several risk flare-ups around the globe. While safe-haven support has kept the June Swiss at these elevated price levels, upcoming Swiss economic data will need to remain positive in order to avoid a retest of last week’s sharp sell off. The June Swiss may find resistance near the 108.50 level later on this morning, but may have trouble breaking out of this week’s trading range unless there is another risk event that starts to generate news headlines.
POUND: The June Pound put together a strong rally this morning, strengthened by a surprisingly good private survey of UK service industries. While today’s number may not have enough impact to change the Bank of England’s actions at this week’s meeting, a UK rate hike by this summer may not be out of the question. The June Pound may find resistance near the 162.25 level, but looks strong enough to hold prices well above last week’s trading range.
CANADIAN DOLLAR: The June Canadian has recovered from the overnight lows, but has fallen back below yesterday’s 31/2 year high for the move. Strong energy prices and recent strength in Canadian economic data should keep the June Canadian well supported at these levels. The June Canadian should find resistance near the 103.50 level, but may have trouble moving up into new high ground in the wake of this morning’s Chinese rate hikes.
TODAY’S MARKET IDEAS: The Dollar has been able to post a moderate gain this morning, but will have trouble extending this rebound with no US data and the market’s focus on overseas events. The June Pound may extend today’s rally further to the upside, finding benefit from strong UK data in front of the Bank of England meeting later on in the week.
After post-election austerity measures were instituted by the new government during the second half of 2010, UK economic data tended to be less positive than other major global economies. Recent UK numbers have signaled a noticeable improvement, highlighted by a sharp jump in the most recent PPI and CPI numbers. With several members of the Bank of England’s Monetary Policy Committee already calling for higher benchmark interest rates, the chances for a hike during the next few months has gone up significantly. Although those austerity measures have been widely expected to negatively impact growth, last week’s decline in UK jobless claimants may indicate that the damage may not be as great as earlier projected. With UK longer-term interest rates already holding a yield advantage over most major economies, the March Pound is likely to be well supported during the next several weeks and could revisit the 2010 highs above 162.50 without much difficulty. Given the severe nature of this recent rally, however, the March Pound may be vulnerable to a pullback over the next few sessions. This decline would provide an opportunity to enter the market from the long side, as an extension of the rally could easily send the Pound to new high ground during the next few weeks.
Currencies: Swiss May Take Leadership Role
by Dave Hightower on May 25, 2011
Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
DOLLAR: While a number of news services continue to tout the presence of residual Euro zone debt concerns, the Dollar isn’t apparently benefiting from that angle in the early US Wednesday trade. In fact, talk that the US was poised to strike a deal to extend its debt ceiling, in exchange for up to $1 Trillion in spending cuts, only seemed to give the Dollar marginal support. Perhaps the trade thinks the US economy will suffer in the event that austerity measures are implemented, or perhaps the Dollar trade is simply anticipating a soft US durable goods report later this morning. Nonetheless, the June Dollar is showing some slightly positive early action, but so far the charts show an inside day with a pattern of lower highs still developing for this week. It is possible that the Dollar is being partially undermined by talk of a French head of the IMF. Initial up trend channel support in the June Dollar Index today is seen at 76.10 but the US durable goods report might temporarily send the Dollar back below 76.00.
EURO: While a decline in German consumer sentiment readings overnight could have weighed on the Euro, the Euro has generally held together inside the prior two day’s ranges. However, talk of restructuring Greece’s debt package seems to have applied some fresh pressure to European equity markets and that in turn has pushed the Euro downward on its charts. The Euro also saw fresh new lows versus the Swiss overnight and that would seem to leave the Euro vulnerable to more losses ahead. In fact, we think that traders should consider implementing fresh shorts in the Euro this morning, especially if the June Euro manages a bounce off the US durable goods readings. If the outlook for Germany continues to deteriorate that could put the Euro under significant duress and that in turn could mean a decline in the June Euro to the lowest levels since March 17th.
YEN: The Yen seems to have entrenched into a pattern of lower highs and lower lows. BOJ comments overnight seemed to suggest that the recovery from the natural disasters were likely to take time, but that the Japanese fiscal house needed to be reformed even before the quake hit. In fact, the BOJ suggested that the need for further credit easing was on the rise, instead of on the decline and that would seem to suggest that the June Yen is poised for the lowest trade since April 28th. Sell rallies in the June Yen back up to 122.07.
SWISS: The Swiss is in the throes of another flight to quality rise. In addition to slack German consumer sentiment readings, the trade also expects to see rather soft US durable goods news this morning and that would seem to leave the Euro and the Dollar off balance because of classic fundamental news flow. With a restructuring of Greek debt also possible ahead, the June Swiss might be poised for a rise to the highest levels since May 10th. Support in the June Swiss rises to 114.05, with little in the way of resistance seen until 114.84.
POUND: Apparently sluggish UK growth figures haven’t undermined the Pound this morning, as the currency made fresh new highs for the week. In other words, the Pound is seen as the lesser of two evils, when compared to the Euro. Down trend channel resistance today was initially violated at 1.6234 and a close above 1.6225 could cause the currency trade to begin speculating on a more significant recovery in the Pound. Holding back the Pound are concerns that extremely weak UK house hold spending figures at the start of the New Year could present a problem to the currency at higher exchange rate levels later in the year.
CANADIAN DOLLAR: With a fresh downside breakout in the June Canadian putting the currency at the lowest level since March 28th, it is possible that the Canadian is poised to see some stop loss selling by the bull camp. Apparently a more positive view on commodities from Goldman was of little lasting benefit to the Canadian, which looks to maintain a pattern of lower highs and lower lows directly ahead. Next significant downside support in the June Canadian Dollar is seen at 101.58.
TODAY’S MARKET IDEAS: The Swiss might become the primary leadership market, especially in the face of slowing evidence from a number of key global economies.