DOLLAR: The Dollar continues to show signs of a downside breakout on the charts and the fact that the slide this week comes in the face of talk about intervention that could have supported the Dollar really highlights the current weakness in the US Dollar. Clearly seeing four days of gains in world equity markets deflates the flight to quality angle significantly and we assume that is the main reason why the Dollar has come under pressure this week. Since the US equity market rally looks to continue in the early going today, we have to think that the Dollar will also remain under pressure. In fact, even in the face of a potential narrowing of the US Trade Deficit this morning, we doubt that the Dollar will garner the least bit of fresh buying interest from the scheduled data. In other words, the market looks set to deflate the Dollar and more gains in the stock market looks to facilitate pressure in the Dollar directly ahead.
Another angle that might explain the shift in the Dollar is the talk that several central banks besides the US, have recently hinted at quantitative easing and that might be seen as a sign that other central banks are pulling ahead of the US in attempting to head off the recession.
EURO: With the Euro managing another new high for the move this morning and the Dollar showing more weakness today it would seem like the pulse up pattern in the Euro is set to extend for at least another trading session. Clearly a tamping down of severe global macro economic anxiety is giving the bull camp its edge in the Euro, but the talk from the SNB about quantitative easing and or currency intervention might also be forces lending some support to the Euro. Some traders are suggesting that the Euro is poised for a rise back above the 130 level and perhaps even for an eventual run up to the 130.87 level.
YEN: One doesn’t even need to look at the charts of the Yen this morning to know that the path of least resistance is set to remain down, as further declines in fear and anxiety look to keep up the pressure on the Yen. In fact, the Japanese floated a dismal Consumer Confidence reading overnight and with a large portion of the world looking for more risk, instruments like the Yen and the Dollar look to be out of favor. Near term downside targeting in the June Yen is seen at 101.04 and perhaps even lower if the euphoria in the equity markets extends throughout the trading session today.
SWISS: Apparently the talk of quantitative easing and or the talk of some form of currency intervention have left the Swiss out of the group of currencies gaining on the recent slide in the Dollar. However, if anxiety is set to come down, we have to think that the 84.00 level in the Swiss has become some form of value! On the other hand, buying significant weakness in a commodity hasn’t historically been a very good trading style and therefore Swiss still seems to be a “following” market instead of a “leadership” market.
POUND: While the Pound has been late to the party it is showing signs of capitalizing off the ongoing weakness in the US Dollar. Given the beat up nature of the Pound this morning and the dire macro economic expectations for the UK economy recently factored into the Pound, we suspect that the currency deserves some type of recovery action. With a 30 day moving average seen up at 142.70, the bull camp would seem to have the edge today but in order to totally throw off the down trend pattern, the June Pound would have to mount a rally above down trend channel resistance, that is all the way up at 145.50.
CANADIAN DOLLAR: After a temporary upside breakout in the Canadian, one gets the sense that the Canadian is poised to make a move off its recent consolidation lows. However, the Canadian will be presented with a critical labor report this morning and that could provide at least a temporary drag on the currency this morning. With the BOC being questioned about the use of quantitative easing recently that could hint at the prospect of a key bottoming in the Canadian. However, without a noted upside breakout in the Canadian this week, in the face of the massive recovery in the stock markets, it is clear that the Canadian has a lot of baggage holding it back.