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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.
