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Currency Market Commentary – 2009.01.22

by Dave Hightower on January 22, 2009

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DOLLAR: After a significant upward pulse on the charts yesterday the Dollar appears to be into a profit taking setback this morning. While there was a significant amount of fresh news out from the UK banking sector again overnight, it is clear that flight to quality buying of the Dollar has abated for now. In fact, we suspect that the Dollar will see a further slide in the wake of the scheduled US numbers this morning. Near term downside targeting in the March Dollar is seen at 85.82 in the wake of the US housing starts and permits data this morning. With a large portion of the strength in the Dollar over the last two weeks, coming from evidence of severe international slowing and also from UK banking concerns, it is clear that without the turmoil and fear outside of the US, the Dollar looks to settle back into a weak corrective bias. Longer term up trend channel support off the December and January upward pattern in the Dollar, leaves up trend channel support line today down at 83.97 but that level rises to 84.12 on Friday.

EURO: While the Euro would like to mount a bit of a bounce in the face of patently weak US data flow this morning, the Euro zone produced some discouraging readings overnight in the form of a decline in a French Household Consumption survey and from a noted decline in November industrial orders. Furthermore, the ECB also pointing out ongoing negative spillover into the main economy from the financial sector uncertainty and that would seem to limit the Euro’s capacity to bounce. However, the Euro should be able to garner some light short covering interest in the wake of the soft US numbers, but overall any rally in the Euro should still be considered a rally within a bear market. Near term resistance on the charts is seen up at 130.80 basis the March Euro.

YEN: After a sensational burst on the upside in the prior trading session, the Yen appears to be moderately but perhaps only temporarily overbought. However, the path of least resistance remains up in the Yen, with negative talk from the BOJ overnight almost completely discounted. With lingering banking sector troubles still present under the surface we have to think that the March Yen is poised to return to the 115 level in the coming trading sessions. However, traders can’t rule out the prospect of a setback to 112.35 before the market returns to the classic flight to quality posture.

SWISS: The Swiss remains in a downward motion on the charts. In fact, little seems to have changed in the Swiss and unless the Dollar weakens significantly in the wake of its data flow today we doubt that the March Swiss is capable of mounting a sustained bounce back above the 86.96 level. Sell rallies until a major shift in global macro economic sentiment is seen.

POUND: While the aggressive pressure toward the UK banking sector has abated somewhat, one doesn’t get the sense that the market is finished with the concern of a major failure in that sector of the UK economy. However, news that the UK wasn’t planning to totally take control of its bank sector would seem to leave the market fearful of even more turmoil ahead in the UK Banking sector. While some Euro zone officials have expressed concern about the ultra low Pound exchange rate, it would not seem like there is a move a foot to halt the slide in the Pound. Therefore, the path of least resistance remains down with the Pound likely to settle in below the 2001 spike low.

CANADIAN DOLLAR: The Canadian appears to be giving off a weak bottoming signal on the charts this morning but the sideways consolidation action might be more of a function of temporary weakness in the US Dollar, than it is a bullish view toward the Canadian currency. In fact, with the threat of global slowing remaining in place and in some cases expected to show even more weakness ahead, that should mean rallies in the Canadian Dollar should still be considered a selling opportunity.

Currency Market Commentary – 2009.01.07

by Dave Hightower on January 7, 2009

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DOLLAR: It would appear that the “New Year” euphoria has waned in the Dollar and that might also be anticipation of disconcerting US numbers directly ahead. It is also possible that the markets are now shifting their attention toward the quantitative easing angle and that shift is apparently given less credence than the classic easing moves. It is also possible that a heavy amount of US debt supply has caused a temporary pause in the buying interest in the Dollar. In fact, with Germany posting a jobless increase of 18,000 overnight and the German jobless rate also jumping by .3%, the Dollar could have garnered a lift this morning but instead the trade is still short term bearish toward the Dollar. Even with a slightly favorable ISM Non farm manufacturing reading from the US in the prior session the trade was unable to hold the Dollar up and that suggests a near term setback, perhaps down to the 82.75 level in the coming 36 hours of trade.

EURO: Perhaps the news of a German rescue package distracted the market from the flow of discouraging Euro zone economic news overnight, or perhaps the long interest in the Euro is simply coming as a result of bearish sentiment of or simply technical profit taking in the US Dollar. However, the Euro might see close-in resistance up at 136.28 and then again up at 136.92 in the lead up to the US Non farm payroll report. However, given all the negative expectations for the upcoming US payroll report, we suspect that the Euro will see a buy the rumor sell the fact response to the figures. In other words, the Euro has a near term rally window, but probably isn’t poised to launch into an uptrend pattern.

YEN: Logically the Yen is seeing some bounce in the wake of the reversal in the Dollar in the prior trading session. However, the Yen trade seems to be heavily orientated toward the ebb and flow of flight to quality psychology and we suspect that the Yen could see a violent and two sided trade over the coming 48 hours of trade. On the other hand, some traders probably see the recent low in the Yen as a value zone and a certain portion of the market is probably going to get long the Yen ahead of the Friday US reports and that could set up a near term rally in the Yen and a very significant pivot point on Friday morning.

SWISS: Like the Yen, the Swiss is seeing a combination of short covering and perhaps fresh buying off anticipation of a weak US number on Friday morning. In short, expect a near term bounce perhaps up to the 91.53 resistance zone in the March Swiss contract.

POUND: The Pound has managed a recovery bounce and that bounce seemed to come from improving macro economic expectations for the US! However, unless the outlook for the US continues to improve, we suspect that the UK economy will remain in a very precarious position and therefore the Pound bounce off the January low, looks to be somewhat suspect into the US Non farm payroll report on Friday morning. Perhaps the March Pound will manage a rise above 150 today but we think the risk to the longs is on the rise unless the US numbers Friday come in better than expectations.

CANADIAN DOLLAR: With another new high for the move in the Canadian on Tuesday, the Canadian hanging within striking distance of the prior high this morning and the Dollar showing weakness, we have to leave the edge with the bull camp today. In fact, it is possible that the Canadian manages a rise above the 85.00 level ahead of the US payroll report, but unless the US jobs situation proves to not be as bad as expected, we doubt that the Canadian is poised to forge a sustained up trend pattern.

Currency Market Commentary – 2009.01.02

by Dave Hightower on January 2, 2009

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DOLLAR: The Dollar attempted a quasi upside pulse on Wednesday and periodic strength in the Dollar over the last two weeks has served to dampen the confidence of the bear camp. As in the equity markets, we think that the latest GMAC developments have given the Dollar a temporary lift. We also think that a couple slightly better than expected US economic reports earlier this week prompted some short covering in the Dollar, but we don’t get the sense that the Dollar is poised to see fresh sustained out right buying. In fact, with a US ISM manufacturing Index reading due out this morning, one should expect resistance at 82.67 in the March Dollar Index to be rather solid. Some players suggest that year end short covering in the Dollar and year end long profit taking in the Euro, were largely responsible for the recovery bounce in the Dollar off this week’s early lows and that would suggest that today will bring about a resumption of the downside effort in the Dollar in the coming trading sessions.

EURO: Certainly some year end profit taking served to knock down the Euro on Wednesday, but if that was the main reason behind the slide Wednesday, that should clear the way for a recovery bounce in the Euro later today. However, at least initially the market seems to remain off balance and vulnerable to more selling, especially if the US stock market manages to trade positive early today. Therefore, one might expect an attempt to retest the Wednesday low of 138.17, but we think that weakness in the Euro in the coming trading sessions should be viewed as a buying opportunity for a possible rally in the Euro later next week into the next monthly US Non farm payroll report.

YEN: Like a number of other financial markets, the Yen seems to be under a slight bit of pressure because of a temporary tamping down of global macro economic anxiety. In other words, a couple slightly better than expected economic readings and residual holiday trading activity seems to have pushed the safe haven buying temporarily to the sidelines. In fact, in the face of a slight upward extension in the US equity market today, it is possible that the March Yen will see a temporary slide below critical support on the charts at 110.08. As in the Euro, a slide in the Yen in the coming two trading sessions should be seen as a buying opportunity in the Yen ahead of the next US unemployment report.

SWISS: As in the Euro and Yen, the flight to quality angle is simply not playing in the Swiss early today. Therefore, we suspect that the Swiss is poised to see a slight downside extension in the trade today. In fact, the failure to hold above 94.00 might turn up the technical liquidation bias in the Swiss early in the action today.

POUND: With news that UK lending improved that has to take some of the fundamental pressure off the Pound. However, the Pound didn’t show much in the way of a bounce off the favorable news in the early going today and that suggests the overall downtrend bias in the Pound remains in place. In fact, news that Halifax house prices declined sharply again and the expectation of another weak US ISM reading this morning, should leave the overall bias in the Pound pointing downward.

CANADIAN DOLLAR: The coiling pattern in the Canadian continues but in looking at the chart formation, one does come away with a generally bearish bias in the Canadian Dollar. With oil prices moderately lower and a host of physical commodities showing initial weakness today we have to think that the March Canadian is poised to fall toward consolidation support down around 81.60.

Currency Market Commentary – 2008.11.26

by Dave Hightower on November 26, 2008

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DOLLAR: The Dollar has been able to trade firmer overnight on safe haven support as weaker global equity markets reflects doubt over whether the latest government stimulative plan would help resolve the credit crisis and avert a protracted and severe recession. With money market conditions still tight, the Dollar’s status as a safe haven currency still seems to be in tact and ongoing concerns over worsening economic conditions certainly seems to have lowered investor’s risk tolerance overnight as the market euphoria over the latest government stimulus efforts seems to be fading. In fact, with a wide range of US economic reports being released today, the Dollar’s stature as a safe haven currency will certainly be tested today since economic news is likely to show a deepening recession taking hold in the 4th quarter and that has the potential to trigger a strong rally in the dollar if equity markets slide sharply on the news. But we also think there is a rising risk that the appeal of the Dollar as a safe haven asset could start to diminish given the huge amount of US debt being used to pay for these massive economic stimulus plans. In fact, the governments quantitative easing and jitters over the cost of these stimulative efforts could limit the upside potential in the Dollar and very low US yields could also start to work against the currency. With plenty of other factors working against the Dollar, a loss in the currency’s safe haven status could send the Dollar sharply lower. Therefore, today’s economic report flow could be a critical test of the bull camp’s resolve.

EURO: The Euro has seen a two sided trade overnight, but it looks like some risk aversion has crept back into the market as yesterday’s optimism tied to the latest US government stimulative plan seems to have faded a bit. So far, news of another rate cut from China and expectations for a European Union stimulative plan of at least an 130 billion euros to be announced today hasn’t provided too much price support to the Euro. And with the market likely to to be faced with more bearish economic news, a potentially sharp slide in US equity markets this session is likely to drag the Euro down as well.

YEN: The Yen has firmed overnight as a lower investor risk tolerance amid ongoing concerns over the depth of a global economic recession has encouraged more profit taking on carry trades. News that China cut interest rates overnight seemed to pull the Yen off overnight highs. But there seems to be more upside potential in the Yen since economic confidence remains low and the optimism seen in the US equity market rally yesterday off the latest government stimulative program appears to have fizzled overnight. In fact, with a string of US economic reports out today there is the potential for the Yen to trade sharply higher if the news flow depicts a considerable worsening in US economic conditions.

SWISS: The Swiss has seen a mostly lower trade overnight as the currency continues to be tied to the ebb and flow of the Euro. Expectations for a large EU stimulative package have done little to improve sentiment. Since investors have not yet sought out the Swiss as a safe haven, the market remains vulnerable to further selling this session if today’s US economic reports raise the risk aversion of investors.

POUND: The Pound has pulled back on profit taking which is not too surprising considering the sharp upward push the currency has made this week. Weaker global equity markets overnight have lowered investor risk tolerance and expectations for the UK 3rd qtr GDP to show a .5% contraction is also working against the Pound this morning. There is also the potential for the market to give up more ground today since the large number of US economic releases are likely to show economic conditions worsening in the US which has the potential to pull the Dec Pound back towards the 150 level.

CANADIAN DOLLAR: The Dec Canadian has seen a two sided trade overnight as rising risk aversion and a firmer Dollar have been somewhat offset by firmer oil prices. But we suspect there is more downside potential in the Canadian today since the US economic reports are likely to show a deepening economic recession. Weakening US demand will certainly undermine the outlook for the Canadian Dollar considering that Canada is a major US trading partner.

Currency Market Commentary – 2008.10.28

by Blog Admin on October 28, 2008

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DOLLAR: Apparently some of the flight to quality psychology has been tamped down for the time being as the US Dollar is seeing some profit taking in the wake of gains in international equity markets overnight. With the Dollar clearly reaching an excessive overbought technical condition on the charts recently and the extreme fear and anxiety over the global credit crisis potentially set to take at least a temporary break, it would not be surprising to see the Dollar weaker for 24 to 36 hours. As we suggested yesterday, the prospect of intervention against the Yen, the prospect of US rate cuts and some flight to quality migration toward the Swiss, all seemed to hint at a temporary pause in the somewhat historical Dollar run up. While the trade generally expects the US Fed to cut interest rates by 50 basis points there are some traders anticipating a 75 basis point cut and that type of move would probably temporarily serve to undermine the Dollar. It is also possible that a sweep of weak US data this morning could rekindle some concern toward the US economy again, and that in turn could facilitate the profit taking in the Dollar in the morning action today. Near term downside corrective action is seen at 87.61 today.

EURO: A pattern of lower highs in the Euro and interest in other currency market developments means the Euro will probably not get the brunt of the technical short covering interest in the coming two trading sessions. In fact, with evidence of slowing seen overnight from the French Consumer confidence readings, we suspect that the Euro will only forge a fleeting bounce today. With the US poised to cut interest rates and the BOE recently hinting at the prospect of rate cuts, one really gets the sense that the ECB is falling even further behind the curve and that could mean that slowing in the euro zone will continue to worsen and that the Euro zone will probably be the last to recover in the event that overall global conditions show signs of stabilizing.

YEN: Apparently the Yen was historically over wound on the upside and the threat of intervention and a tempering of the flight to quality angle seems to have prompted a backlash on the charts overnight. In fact, with the Nikkei joining the short covering pulse overnight, the flight to quality status of the Yen is at least temporarily reversed and given the historical rate of climb in the Yen recently traders should expect a rather violent corrective balancing on the charts over the coming two trading sessions. Near term corrective targeting in the December Yen is seen at 104.66 and unless the market returns to that level in the wake of the US data this morning, it is possible that the yen will hang up in a 104.66 to 105.95 range for the coming 36 hours of trade before a major trend decision is made Wednesday afternoon.

SWISS: The action in the Swiss today will be very telling, as the Swiss recently drifted into a flight to quality mode and a temporary abatement in high anxiety could have a noted impact on the currency. Clearly the December Swiss is capable of a quick slide back to quasi consolidation support on the charts around 85.61 especially if global equity markets forge impressive two day gains into the US rate cut window on Wednesday afternoon as that could mean that the Swiss falls to even lower support of 85.50.

POUND: Certainly the Pound is excessively oversold, especially given the compacted decline of the last two weeks and therefore a knee jerk bounce in the currency is possible. However, given the lackluster initial action in the Pound today the currency isn’t giving off the impression of a currency expected to come back into full favor. Therefore, we see a muted bounce to only 158.54 basis the December Pound contract. Apparently the promise of coordinated rate cuts from the UK’s Brown has failed to stir optimism toward the Pound.

CANADIAN DOLLAR: Given the historic beating of the Canadian since the late September highs, it would be hard not to suggest that the Canadian has the most technical short covering capacity of the most actively traded currencies. However, the initial response in the Canadian today is rather anemic and that suggests that the trade needs to see something even more definitively positive toward the global economic outlook, or an even more optimistic view toward commodities to mount a sustained bounce. Initial corrective capacity is only 77.95, unless equity prices really make some positive noise.

Financial Markets Mid-Day Audio – 2008.10.22

by Dave Hightower on October 22, 2008

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Daily Currency Market Commentary – 2008.10.20

by Dave Hightower on October 20, 2008

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DOLLAR: Apparently seeing a host of international equity markets forging gains overnight has dented the US Dollar from a flight to quality perspective. Critical support in the Dollar is seen at 82.42 this morning, but it is possible that the Dollar will be at least temporarily undermined by the decline in the US Leading Indicators report this morning but recently the currency markets have not paid that much attention to the regularly scheduled US data flow. The October 14th Commitment of Traders with Options report for US Dollar showed the Non-commercial position to be net long 25,349 contracts, with the Non-reportable position net long 811 contracts and that made the “combined” spec and fund position net long 26,160 contracts as of early last week. On the other hand, with the US Dollar climbing another 2 points in the wake of the COT report mark off, we suspect that the magnitude of the net spec long positioning is understated into the opening today. Given a short period of financial sector calm, that could open up the door for a temporary corrective slide in the Dollar. Initial support levels into the opening this morning are pegged at 82.42, 82.31 and then again at 82.21.

EURO: While the Euro seems to have a slightly positive bias in the early going today, the market still looks somewhat range bound. In fact, if the market were poised for a distinct run up today, we suspect that the slightly hotter than expected German PPI report released overnight would have provided the Euro with the capacity to rise above close-in resistance of 135.12 in the December Euro contract. The October 14th Commitment of Traders with Options report for Euro showed the Non-commercial position to be net short 34,732 contracts, with the Non-reportable position also net short 6,577 contracts and that made the “combined” spec and fund position net short 41,309 contracts as of early last week. Furthermore, with the Euro falling almost 2 additional points in the wake of the COT report mark off early last week, we suspect that the net spec short positioning in the Euro was understated into the opening today and that could provide the Euro with the capacity to rise back into a range bound by 135.33 to 136.00.

YEN: With global equity markets showing initial strength today it would appear that anxiety is somewhat on the decline. Therefore, the Yen which has recently been seen as one of the primary flight to quality instruments, would seem to be destined to give some ground. Near term downside targeting is seen at 96.00 and then again down at the 97.54 level basis the December contract. In fact, as long as calm reigns in the stock market, one might assume that the path of least resistance in the Yen is pointing down.

SWISS: The Swiss remains in a vulnerable status on the charts with the 88.00 level potentially a critical pivot point today. However, given that the Swiss on Thursday was hammered sharply lower and ultimately rejected the 87.00 level, the Swiss appears to have already liquidated a good portion of the weak handed longs. In fact, unless the US stock market mounts a very strong rally this morning, we doubt that the December Swiss will fall below the 87.80 level.

POUND: The Pound is exhibiting a short covering action in the early going today and that appears to be the result of coordinated efforts to unfreeze the credit markets. In our opinion, the Pound needs to see the Libor market soften for the Pound to mount a quick run back up to the 177.50 level. However, given the magnitude of the oversold condition in the Pound around the recent October spike low, it would not be surprising for the Pound to make a run at the 50% retracement level off the September/October slide which is seen up at 177.04 in the action today.

CANADIAN DOLLAR: The Canadian Dollar is another currency that is extensively oversold and perhaps one currency that has factored in the most significant slowing of the global economy. While it might be premature to downplay the magnitude of the slowing expected in the global economy, it is possible that shorts in the Canadian will be uncomfortable in their positions today and that could allow for a temporary recovery bounce back above the 86.00 level on the charts.

Morning Currency Commentary – 2008.10.07

by Dave Hightower on October 7, 2008

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DOLLAR: The Dollar is clearly overbought after the sharp flight to quality run up of the last three weeks. However, a lack of definitive action from the ECB on some form of response to the spread of the financial crisis would seem to leave the Dollar underpinned on the charts. We think the lack of a Euro bounce in the face of better than expected German numbers overnight highlights the ongoing bullish bias toward the Dollar. However, we get the sense that the Dollar is vulnerable to some form of temporary back and fill, especially if the extreme financial market turmoil temporarily abates. Perhaps some players think that the Dollar is vulnerable to selling in the event that the US moves to cut interest rates, but in our opinion, moving to cut US rates could at least temporarily diffuse fears of severe slowing and in turn shore up the December Dollar above close-in support of 81.00. While the US is scheduled to release consumer credit readings late in the trading session today, the market just doesn’t seem to be locked onto the US data for now, as the main focal point of the Dollar trade is still the flight to quality angle. Those that are long the Dollar should once again consider temporarily wrapping up those positions with a short out of the money call and a long just out of the money put combination.

EURO: The Euro appears to be showing some signs of strength this morning and that could lead to a corrective bounce. In fact, with German August manufacturing orders overnight managing a somewhat impressive gain, it is possible that the overt fear of severe slowing in the Euro zone is temporarily displaced. In fact, for the trade not to take the EU failure to come forth with a plan to address the looming credit crisis in the Euro zone, the trade could have punished the Euro this morning with another new low for the move. However, we get a sense that world equity markets might see a temporary bounce (off the hope for coordinated rate cuts) and that in turn could reverse the constant flight to quality buying of the US Dollar and allow the December Euro to regain the 137.50 level over the coming 24 hours of trade.

YEN: While the Yen is clearly short term overbought a number of players are seeing the yen as a flight to quality instrument or perhaps the strength in the Yen is merely a combination of massive repatriation or ongoing carry trade liquidation efforts. For the time being, one can’t argue with an eventual continuation of the up trend in the Yen, but a slight bounce in US equities today could result in a temporary back and fill in the December Yen back to close-in support of 98.50.

SWISS: While the Swiss missed the typical flight to quality buying interest seen in the past in the face of historically troubling financial times, it would seem like the December Swiss has now managed to forge a fairly solid support zone around 87.38 level over the last 24 hours. However, it still seems like the Swiss is going to remain out of favor unless the world financial situation is thought to be spinning totally out of control! In short, the ebb and flow of macro economic expectations for the Euro zone looks to dominate the action in the Swiss.

POUND: The Pound is getting a noted bounce off the last 24 hour lows, despite the markets concern that the UK has yet to offer up its own comprehensive containment package. In fact, the Pound is bouncing this morning despite another weak reading from UK industrial production type readings. In short, the Pound was excessively oversold and the mere hope of coordinated rate cuts seems to have prompted some concentrated buying interest. Near term resistance is seen at 174.65.

CANADIAN DOLLAR: With what appears to be a temporary pause in the fear of a severe global recession, the Canadian has managed to bounce off the 90.25 support zone. However, without a clear coordinated set of rate cuts ahead we doubt that the Canadian will be able to mount anything beyond a temporary bounce.

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