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DOLLAR: The Dollar seems to have carved out some support just under the overnight lows, but in general the charts in the Dollar still seem to give off a bearish tilt. We also think that a lack of definitive favor in other currencies is providing the Dollar with some artificial support. However, unless the general expectations for a slow and gradual global recovery are discarded, we doubt that the Dollar is going to see anything other than temporary technical short covering gains. However, with the Dollar showing some minor positive action in the wake of a better than expected German Ifo reading overnight one gets the sense that the Dollar is set to make a weak recovery bounce, perhaps in the event that US equity prices weaken later today. In the end, rallies in the Dollar appear to opportunities to get short for an eventual continuation of the downtrend pattern. Unless the US scheduled data points today are surprisingly weak, we doubt that the September Dollar Index will be able to rise above 78.65 today.
EURO: While the Euro is showing some initial positive action this morning, the bull camp has to be partially discouraged by the failure to get a big lift from better than expected German Ifo readings. In fact, the August Ifo reading came in at 90.5 versus an 88.8 reading in the prior month and that should have resulted in more favor flowing toward the Euro. Up trend channel support in the September Euro this morning is seen at 142.75, but we doubt that as expected US data flows later this morning, will serve to yield a distinct upside pulse in the Euro today. In fact, we get the sense that the Euro is showing signs of losing a portion of its recent bullish momentum. Even in the face of weakness, it would appear that the Euro has a secondary close-in support zone down at 142.50 on the charts.
YEN: The yen has clearly lost a good portion of the bullish bias that was in place into the August 21st highs. As suggested in other currency coverage today, there seems to be a lack of leadership in the currency markets right now and that is probably the result of a lack of fresh fundamental psychology. Pushed into the market, we would look to get short the Yen today on a rally to resistance of 106.55, but it is possible that the September Yen will find fairly solid support on the charts down at 105.95.
SWISS: The Swiss also seems to have lost a portion of its bullish bias that was in control of the market into the August 21st highs. The bull camp can suggest that the market retains a fairly solid consolidation support zone just above the 94.00 level on the charts and therefore we would suggest that short term traders look to be buyers of an early setback in the Swiss.
POUND: Clearly the weakness in the Pound this morning presents the most definitive trend in the currency markets. In fact, despite decent economic news from the IFo, mostly favorable equity market action over the last week and ongoing expectations of a global recovery, the Pound has acted like anything but a recovery currency. In other words, the market sees the Pound to be over valued and anything short of a much stronger than expected recovery, looks to see the Pound weaken. In the event that economic doubt on the recovery escalates, we suspect that the rate of slide in the Pound will expand. Near term downside targeting in the September Pound is seen at 162.50 but we can’t rule out a return to the 160 level into the next US unemployment report.
CANADIAN DOLLAR: Like the Pound, the Canadian is vulnerable to even more declines directly ahead. In fact, without very sterling economic readings and sharply higher global equity prices today, we suspect that the September Canadian is poised for a slide back down to the 90 level.
TODAY’S MARKET IDEAS: A lack of definitive leadership in the currency markets for the coming trading sessions.
