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DOLLAR: While the market will see some news from a number of foreign central banks this morning, the direction of equity prices will probably be the primary driving force in the currency market in the coming two trading sessions. However, news that Euro zone consumer spending fell off the map in the latest readings, clearly suggests that areas outside of the US are also slowing rapidly and that is some justification for the continued flight toward the Dollar. With the corrective action in the Dollar yesterday, we suspect that some of the overbought technical condition of the Dollar was repaired and that a resumption of the up trend pattern is likely in the coming trading sessions. For one to suggest that the Dollar is poised to rally sharply, in the face of potentially disastrous claims and unemployment data window really highlights the bullish bias toward the Greenback. In fact, even if parts of the US auto sector go into a meltdown, it would not seem like the Dollar will be deterred from its upward track on the charts. However, the 89.74 level in the March Dollar index does seem to offer up some form of initial resistance today, but if the Dollar can rally through that level, in the aftermath of the ongoing claims data, that should reconfirm the upward bias.
EURO: The Euro tried to show some strength overnight but apparently the latest sweep of GDP readings from that economic area seems to have killed off the rally attempt. With Euro zone and German consumer spending/retail sales readings coming in soft overnight, the market continues to foment the opinion that the Euro zone hasn’t done everything it can to limit the extent of the damage to the Euro zone economy. We see down trend channel resistance up at 126.78 and even more significant resistance up at 127.50 and recovery attempts in the Euro should be sold, as the trend looks to remain down. In order to hold the 125.00 level over the coming two trading sessions, the Euro will have to see better than expected US economic readings, or some sign that the US financial situation is getting out of control again.
YEN: Despite the fact that global stock prices are showing renewed weakness this morning, the Yen remains out of favor and that really has to discourage the bull camp in the Yen. The next critical chart support level in the March Yen is seen down at 100 and we suspect that the Yen won’t be able to avoid a slide down to that level in the coming two trading sessions. The next lower downside targeting in the Yen is seen down at 99.10.
SWISS: We are not sure what impact will be seen on the Swiss in the wake of the ECB rate decision this morning, but it is really difficult to discount the negative chart formation in the March Swiss. We continue to think that the Euro zone has done too little to cushion the Euro zone against sustained slowing and for that reason we can’t throw off the downtrend pattern in the Swiss. Next downside targeting in the March Swiss is seen at 84.57.
POUND: With news that UK house prices fell to another new low, we suspect that it will only be a matter of time before the March Pound falls back to and below the 140 level. Perhaps the Pound will get a temporary recovery bounce off any news that the BOE is indeed poised to implement quantitative easing efforts. The mere threat of quantitative easing should give pause to the sellers in the Pound, even if that threat is a temporary influence.
CANADIAN DOLLAR: Now that global equity markets forged a temporary euphoria bounce and the Canadian has also forged a bounce off the lows that should make it easier to attack the Canadian for an anticipated move to fresh new lows.
