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.