Currencies: Dollar Should Hold Early Gains; Needs Good Claims to Continue Up

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DOLLAR: The Dollar is finding moderate strength this morning, and continues to extend this week’s recovery. While the tone of recent US economic data was improved by Tuesday’s ISM number, overseas risk concerns remain the Dollar’s main source of support. A surprisingly weak reading for a private jobs survey from the US yesterday took the Dollar well below yesterday’s early highs, which may a strong indication of how important jobs-related numbers will be for sustaining this dollar recovery. A downtick with today’s Jobless Claims numbers would help to consolidate recent gains but until tomorrow’s Payroll numbers are released, the Dollar will have trouble putting together any sort of large-scale up move. The Dollar will have a near-term upside target of 79.50 this morning, as there is more than enough Euro zone risk concern to keep the Dollar well supported near this week’s highs.

EURO: The June Euro remains on the defensive this morning and is close to posting a fresh low for this current sell off. Today’s Spanish debt auction failed to provide the June Euro with much support, as 3-year yields jumped 1.3% and 5-year yields jumped 1.2% from March’s bond sale. The ECB meeting later on this morning has taken on additional importance, as a positive reception towards post-meeting comments may be required to put the brakes on this current pullback. With this weekend’s elections in France and Greece hanging over the market, the June Euro needs to find some very “good news” in order to find some measure of support. The June Euro is likely to slide down to the 131.10 level later on in the session, and may be on course for a retest of the mid-April lows if sentiment continues to deteriorate.

YEN: The June Yen has found moderate pressure this morning, as there has been a noticeable shift in flight to safety flows out of Europe towards the Dollar during the past few sessions. While Euro zone problems are not likely to go away soon, Japanese officials continue to be vocal about the problems that have resulted from recent strength in the Yen. If today’s US data can avoid any negative surprises, the June Yen is likely to slide further away from Tuesday’s high for the move. The 124.20 level continues to be a downside target for the June Yen, as it would take a severe flare-up of Euro zone risk problems in order to lift prices back towards the recent highs.

SWISS: The June Swiss is moderately lower this morning and continues to be weighed down by this week’s build-up of Euro zone anxiety. While Switzerland was among several European nations that posted sharply weaker PMI numbers during the past few days, officials are likely to keep the June Swiss “overvalued” by remaining committed to their current peg to the Euro. The June Swiss appears headed down towards the 109.10 level this morning as Euro zone problems continue to provide a large amount of direction.

POUND: The June Pound may have put the brakes on this week’s pullback but remains well below the recent highs for the move. Recent comments from Bank of England officials have sent a mixed message towards the near-term prospects for fresh UK quantitative easing, so today’s weak reading for the UK service PMI number is likely to weigh on prices this morning. The Pound is close to a 22-month high versus the Euro, however, which will help to lift prices back to the recent highs if there is a substantial improvement with macro-economic sentiment later this week. The June Pound looks to be headed down to the 161.50 level this morning, especially if Euro zone problems continue to rattle global markets.

CANADIAN DOLLAR: The June Canadian continues to build onto yesterday’s late-session recovery, in spite of having little carryover support from energy and metals prices this morning. With few Canadian economic numbers during the rest of this week, the June Canadian should benefit from a positive reception to US data over the next few sessions. The June Canadian is headed towards the 101.65 level later today, but may not retest Monday’s highs for the move until tomorrow’s US Payroll numbers are out of the way.

TODAY’S MARKET IDEAS: The Dollar should hold onto moderate strength this morning but will need a positive read on the weekly Jobless Claims numbers in order to build onto these early gains. The June Canadian is likely to extend this morning’s rally if macro-economic sentiment continues to improve.

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