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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.
