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DOLLAR: While the Dollar mounted a very impressive upward extension early in the trading session yesterday, the Dollar was unable to maintain those gains. With China making some statements that seemed to challenge the US Dollar’s global reserve currency status, we are not surprised to see the Dollar forge at least a temporary topping action on the charts. We also think that the trade is waiting and watching for the level of interest in the coming US Treasury auctions, as solid demand for the upcoming US issuance could suggest that money will generally continue to flow toward the US. However, it would appear that the trade is simply unwilling continue to throwing large amounts of money at the Dollar, unless the US can once again reinforce last week’s views that the US economy is into a recovery mode. While we think that the Dollar will generally retain most of the recent gains, the Dollar will have to get an as expected decline in Wholesale inventories today and it might also have to see strong demand for the first leg of Treasury supply later today. Critical support in the June Dollar Index is seen at 80.58 but pushed into the market this morning we would have to favor the downside in the Dollar.
EURO: Surprisingly the Euro charts also look vulnerable today and that would seem to suggest that neither the Dollar, nor the Euro looks to dominate sentiment in the early action today. With German April Industrial output overnight falling by 1.9%, the Euro would seem to be undermined, but with the German government also suggesting there is the chance of a bottoming in output, that tempers the vulnerability of the Euro this morning. In short, we see little in the way of domination in the currency markets, but the residual strength in the Pound, Canadian and Yen would seem to leave the Dollar and the Euro, as the weakest link in the marketplace. Near term support in the June Euro is seen at 138.35, but we can’t rule out a near term slide below the 137.50 level later this week.
YEN: The Yen saw some initial favor overnight but the currency was unable to hold that pulse up move. A normal retracement of the May to June washout in the Yen might allow for a bounce back to 103.20 but it could take a slight deterioration in the US economic outlook to give the Yen a definitive boost. In short, it might take noted declines in equity prices in order to put the Yen in an uptrend track.
SWISS: The Swiss truly looks to have slipped into a negative posture on the charts, and given the positive correlation between the Swiss and the equity markets in the April through June time frame, we have to leave the bias in the Swiss with the bear camp. Near term downside targeting in the June Swiss is seen at 90.96 and it could take a rise back above the 92.07 level to effectively turn the trend back to the upside.
POUND: The Pound is surprisingly into some favor this morning, along with the Canadian and that would seem to point to a revived upbeat macro economic outlook. However, the UK overnight saw a somewhat negative regional house price reading, but apparently that reading wasn’t as negative as some expectations. In other words, the bulls in the Pound continue to spin the fundamentals into their favor. We also think that the lack of definitive leadership in the currency markets has allowed the Pound and the Canadian to garner an undeserved edge. In short, the Pound is mostly winning by default.
CANADIAN DOLLAR: After a noted washout and recovery it would appear that the Canadian is back in favor. We suspect that part of the strength in the Canadian is the result of a lack of alternatives but we also think that some trend players are serving to push up the Canadian. We have to think that the bull camp in the Canadian needs some type of favorable action in the equity markets in order to continue to push higher on the charts. Support is seen at 89.94, with the first pivot point seen up at 90.26 today.
TODAY’S MARKET IDEAS: Little dominance in the currency markets but the Canadian, pound and Yen look to have the edge today.
