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DOLLAR: With the Dollar seeing a quasi technical correction off the Wednesday high and global macro economic anxiety on the rise again, it is likely that the Dollar will resume its upward track on the charts. While the Dollar might gain some momentum, the early gains weren’t nearly as impressive as one might have expected in the wake of the sharp slide in global equity prices overnight. However, the Yen is garnering some of the flight to quality interest and that has sapped buying fuel from the Greenback. For the time being the trade seems to be content to turn to both the Dollar and the Yen in the face of the latest downside shift in macro economic sentiment. Near term upside targeting in the March Dollar index is seen up at 88.71, with close-in pivot point support in the Dollar seen at 87.92. While some favorable UK retail sales figures could have tamped down some of the anxiety this morning, the markets are apparently not going to be easily distracted from their current economic focus. Perhaps the somewhat favorable UK retail sales readings were more than countervailed by news that UK home repossessions touched a 12 year high last year. In short, the world is concerned about more severe slowing ahead and that should leave money flowing toward the US Dollar.
EURO: With some soft Euro zone PMI readings this morning and seeing the German PMI hit a record low, that clearly highlights the ongoing and perhaps escalating threat of severe slowing and that in turn has clearly reversed the recent strength in the Euro. In fact, despite some ECB efforts to restore confidence with its overnight dialogue, it would appear that the pressure looks to return to the Euro currency. In fact, a number of analysts think that the March Euro is poised to fail at the 125 level and that the currency could possibly fall down to the November consolidation lows around the 124.00 level. Once again, the ECB failed to react quickly and it also failed to throw everything it could at the slowing from the stimulus front early in the crisis and that means the Euro will continue to be out of favor in the face of bouts of widespread global economic anxiety.
YEN: Despite the fact that one Japanese stock measure managed a fresh 26 year low overnight the Yen appears to be back in favor from the flight to quality angle. In fact, despite a significant downward revision in Japanese economic expectations early in the week, the Yen and the Dollar appear to be the choice for flight to quality buying in the currency markets. However, we get the sense that the magnitude of the upside in the Yen, on the coming run up, might be less intense than the early January rally.
SWISS: One look at the chart in the March Swiss and it is clear that the combination of renewed global macro economic anxiety and a widening of the US probe into UBS, has left the currency aggressively out of favor. In fact, given the propensity for widespread and intense macro economic anxiety ahead a decline below the 84.00 level is possible this morning in the Swiss. Until something very significant changes, the path of least resistance in the Swiss is expected to point downward.
POUND: The Pound was initially able to hold around the prior session’s close because of a surprising up tick in UK retail sales. However, with UK home repossessions apparently reaching a 12 year high in 2008, it is clear that the UK economy is serving to keep the Pound somewhat off balance. We see no reason why the Pound won’t continue on the downside, despite the attempt to bounce in the prior trading session. Down trend channel resistance is seen all the way up at 148.14 today, but more significant and relative resistance is pegged at 144.51.
CANADIAN DOLLAR: The Canadian in the early going is holding up but we can hardly rule out a retest of the February low down at 78.88 in the wake of a rush toward the Dollar early today. We expect the Canadian to correlate with the equity markets and in the early going today, the stage looks set for downside follow through in the equity markets and that should turn up the selling pressure on the Canadian.
