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DOLLAR: The Dollar has already forged a fresh new low for the move this morning and in the process the Dollar has reached the lowest level since September 2008. Apparently the trade sees the current setup to be such that more flight to quality premium needs to be extracted from the Dollar. It also appears as if a certain portion of Dollar bulls were pushed out of position because of the idea that the US is going to be stubborn in attempting to hold interest rates down. With the Dollar market showing signs of inflation liquidation, it is even possible that some money leaving the Dollar is poised to flow to the gold market and other inflationary markets, perhaps because the trade thinks the US is at least capable of managing low rates in the short term. In short, the world senses inflation but at least in the near term traders don’t think that inflation will register in the Dollar. With the September 1st Commitment of Traders with Options report for US Dollar showing the Non-commercial position to be net short 2,406 contracts, with the Non-reportable position net long only 93 contracts, that made the “combined” spec and fund position net short 2,313 contracts as of early last week and that could mean that the US Dollar is destined to expand its net spec short positioning significantly in the coming trading sessions. Near term downside targeting in the Dollar could be seen off the weekly chart all the way down at 76.02.
EURO: With the September Euro forging a definitive upside breakout and in the process reaching the highest level since December of 2008, it would appear that the recovery view is back in vogue. In fact, some traders think that the Euro is actually moving to price in some inflationary conditions ahead in the wake of the G20 promise to leave interest rates low for a long period of time. At least for the time being, the trend in the Euro might result in a rise to the next resistance level up at the 146.87 level, especially if global equity markets manage a series of gains directly ahead. With the September 1st Commitment of Traders with Options report for Euro showing the Non-commercial position to be net long 9,895 contracts, with the Non-reportable position net long 16,613 contracts, that made the “combined” spec and fund position net long only 26,508 contracts as of early last week and therefore the Euro can probably add to this morning’s upside without the Euro becoming excessively overbought technically.
YEN: The September Yen at this hour has not managed a climb above last week’s highs and therefore the 108.77 level could be seen as initial resistance today, but given the prospect of positive technical momentum, we suspect that the next upside target in the Yen could be seen up at 109.04. With recent Japanese numbers not exactly inspiring macro economic differential confidence in the Yen, it is clear that the market views the Yen, as another prime benefactor of near term weakness in the US Dollar.
SWISS: Like a number of other currencies, the Swiss has managed to reach the highest level since December 2008 and it would appear that confidence in a global recovery and or inflation expectations outside of the US, is inspiring a massive exodus from the Dollar. Current support is pegged at 95.03, with near term upside targeting in the Swiss seen up at 95.88. Apparently the trade currently isn’t that concerned about SNB intervention to stop the Swiss from racing higher in the coming trading sessions!
POUND: The Pound is back into a “recovery currency” mode this morning, with UK industrial production readings actually serving to add to the bullish argument. However, with slightly higher global equity prices, merger and acquisition talk and ideas that international interest rates are going to held down indefinitely, it is clear that investors and traders view the Pound as an undervalued currency. Therefore, we can’t rule out a near term run up to consolidation resistance in the September Pound at 166.27. While the Pound needs a perfect fundamental storm to rally, in the near term the bulls seem to have resolve and the bears look to be on the run.
CANADIAN DOLLAR: With the global economic outlook improved and the markets expecting inflation, the Canadian is a prime currency to catch some spillover buying interest. In fact, there might be little resistance until the early August highs of 94.08 in the September Canadian Dollar. Perhaps some of the buying in the Canadian this morning is the result of ideas that the Canadian commodities of metals, energies and grains are all set to benefit from the current wave of inflationary thinking.
TODAY’S MARKET IDEAS: News lows in the Dollar opens up the market to a steep slide in the Dollar and sustained gains in all non Dollar currencies.
