DOLLAR: The Dollar is clearly losing a portion of the flight to quality support which seemed to be lifting the Dollar ahead of the Tuesday highs. Some players thought that the Dollar was being undermined because of its proximity to Mexico, while others suggested that non Dollar currencies simply looked cheap in the event that the swine flu situation was set to be contained or even temporarily controlled. With some slightly favorable Euro zone economic readings released overnight and modest gains in European equity shares this morning, the Dollar might remain under light liquidation pressure in the trade today. Near term downside targeting in the June Dollar index is seen at 84.63 and then again down at 84.46. In looking ahead to the US data flow today, the market is generally expecting a negative GDP reading from the US but if the number is not as weak as expected, that might temper some of the residual selling pressure on the Dollar. There is also an FOMC meeting statement later today, but since the Fed seems to have run out of typical easing tools, the trade isn’t expecting anything surprising from the Fed window. Therefore, seeing a mostly uneventful trading session today, could favor the bear camp in the Dollar.
EURO: With a quasi range up extension in the Euro this morning and that action following a somewhat impressive afternoon recovery in the prior trading session, the Euro looks to be poised to carve out even more gains. In fact, seeing a Euro zone Business and Consumer confidence reading improve overnight, would seem to leave the bull camp in control of the Euro today. To a large degree, the Euro is seeing short covering buying, but the Euro is also seen as an undervalued currency in the event that the swine flu situation is temporarily reigned in. While the June Euro looks to be bullishly poised on the charts today, it will run into a two month old down trend channel resistance line at 133.35 today and at 133.20 on Thursday.
YEN: Like the Dollar, the Yen is seeing flight to quality long liquidation. With a holiday in Japan today, one might have expected a narrower overnight trading range but instead the market has seen a noted downside extension on the charts. To extract the swine flu component (it is still unclear if that is justified yet) the June Yen would have to fall back below 102.97. In the event that swine flu is actually coming under control and global equity markets show further strength, we suspect that the June Yen will see a further decline back down to the middle of a 102.50 to 101.28 trading range.
SWISS: For some reason the Swiss, Euro, Canadian and Pound came under distinct pressure in the face of severe economic slowing fears and therefore seeing the Swiss bounce in the face of “hope” that the economy continues to recover is not that surprising. With critical down trend channel resistance seen at 88.03 and the June Swiss sitting right on that level in the early going today, it is possible that we will see a quasi upside breakout in the trade today.
POUND: With a range up extension in the June Pound this morning and favorable leadership being seen in global equity prices, it would appear that the recovery currencies (Pound and Canadian) are due for a near term lift at the expense of the US Dollar and the Yen. The Pound is also being supported by a favorable government debt auction in the prior session and also from favorable scheduled UK data flow from the CBI. In fact, favorable retail sales indications and the favorable technical action on the Pound charts would seem to project the June Pound up to the 148.72 level.
CANADIAN DOLLAR: A big range up extension in the June Canadian Dollar and similar strength in the Pound overnight looks to give the bull camp an edge in the action today. While some Canadian numbers might dull the bullish bias, there would seem to be little overall resistance in the June Canadian until the 83.28 level, especially if the swine flu situation becomes less of an issue throughout the trade today.
TODAY’S MARKET IDEAS: Improving sentiment puts the Dollar and Yen into a retreat versus the Euro, Swiss, Pound and Canadian.