DOLLAR: The Dollar has definitively extended its recent strength and in the process the June Dollar Index has managed to reach the highest level on the charts since March 18th. It would seem that the Dollar is in the midst of regaining the ground lost into the announcement that the US Fed was poised to buy US Treasuries. Therefore, a near term upside targeting in the June Dollar index could be 87.53 this week. In fact, the Dollar seems to be in favor in the face of renewed global slowing fears and weak equity prices, but the Dollar was also in favor in the face of strong equity market action last week and ideas that the worst of the financial crisis was behind the market. In short, the bulls are getting the nod under a number of scenarios. With the April 14th Commitment of Traders with Options report for US Dollar showing the Non-commercial position to be net long 7,760 contracts, with the Non-reportable position net short 1,840 contracts, that made the “combined” spec and fund position net long only 5,920 contracts as of early last week. In other words, the Dollar is hardly showing signs of being classically overbought and that might set the stage for a return to the 88.00 level in the action later this week.
EURO: It goes without saying that the Dollar is on fire and that in turn increases the pressure on the Euro. With the June Euro reaching the lowest level since March 17th, it is clear that hints of a possible ECB rate cut are falling on deaf ears. In fact, seeing the promise of a 25 basis point rate cut on May 7th is hardly a consolation given that the ECB is already well behind the easing curve. In fact, seeing talk that the ECB might begin asset purchases was also mostly discounted as too little too late. With the April 14th Commitment of Traders with Options report for Euro showing the Non-commercial position to be net long 4,227 contracts, with the Non-reportable position also net long 11,396 contracts, that made the “combined” spec and fund position net long 15,623 contracts as of early last week. Therefore, the Euro as of early last week, was still net spec long and despite the sharp slide over the last 4 trading sessions, one probably can’t suggest that the Euro has already become extensively oversold. In short, more downside ahead with the next downside targeting seen at 128.60 basis the June Euro contract.
YEN: The June yen seems to be poised to garner some light spillover buying from the overt weakness in the Euro and Pound. It seems as if a slight let down of macro economic sentiment from last week and a slight amount of concern toward global equity prices this morning has rekindled some light long interest in the Yen. However, the favor looks to rest mostly with the Dollar and therefore the Yen might only see modest short term gains. Near term upside targeting in the June Yen is now seen at 101.99.
SWISS: With the SNB talking down the Swiss exchange rate consistently and the weakness in the Euro seemingly providing some additional selling pressure to the Swiss, it would appear that the June Swiss is now poised for a possible return to the 84.00 level. In fact, until SNB quarterly results are released on April 23rd, it is possible that the downtrend pattern in the Swiss will extend.
POUND: With a massive range down extension overnight, it is clear that the Pound is in the midst of something more than a simple corrective setback. Clearly the Pound became fundamentally overdone at last week’s highs and now that the markets are set to face a series of US earnings reports and the recent flow of scheduled data has highlighted the lingering threat of sustained slowing, it seems as if the June Pound is poised to extend on the downside. In fact, adding into the downside momentum today are fears of more serious slowing in the UK ahead as a result of dismal UK government economic forecasts. It also seems as if an impending UK budget presentation is also weighing heavily on sentiment in the Pound. Therefore, near term downside targeting in the June Pound is seen at 144.50 and perhaps even lower.
CANADIAN DOLLAR: Like the rest of the pro-growth instruments, the Canadian appears to be in the midst of a full blown correction. While we suspect that the market will throw off the idea of serious slowing later this week, for the time being, the bear camp seems to have control and that might allow for a surprising slide in the June Canadian back down to the 80.84 level. Weak oil and equity prices seem to be adding into the liquidation tilt in the Canadian this morning and therefore a return to 80.00 this week can’t be ruled out.