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DOLLAR: In certain measures the Dollar managed a fresh new low in the overnight action, even though the December Dollar futures seems to have held above the prior session’s low in the early going today. Apparently the Dollar can’t even muster support in the face of calls for higher rates, nor can the Dollar manage to gain in the face of slack US NAHB housing numbers. In other words, the Dollar isn’t getting anything but a negative reaction to the interest rate and economic differential arguments. However, there were some rumblings in the overnight headlines as the Euro approached the psychological 150 level and the Swiss looks to approach parity with the Dollar. While French officials expressed some concern about a 150 Euro exchange rate that dialogue didn’t seem to have any lifting influence on the Dollar overnight. In fact, if the markets begin to sense the prospect of intervention from either the ECB or the SNB we suspect that will result in action that attempts to ferret out the intervention and in this case that would mean a serious spike down move in the Dollar. Therefore, we see no reason to call for an end to the downtrend in the Dollar, with even more news lows likely in the coming trading sessions.
EURO: The Euro managed another distinct thrust into new high ground overnight but apparently the 150 level has become a fundamental and technical resistance zone. In addition to the December Euro rising to and promptly falling back from the 150 level, it seems that a French advisor to the French President has suggested that a 150 Euro would be a “disaster” for portions of the French economy. Up trend channel resistance in the December Euro is now seen at 149.92 and that resistance rises to 150 on Wednesday. While we think the trade is set to remain up, traders should watch the Euro’s reaction to the US Housing Starts and permits data this morning, as a weakening of the Euro, in the wake of those US figures might portend a temporary technical setback ahead.
YEN: With the Euro seemingly running into psychological resistance this morning, the Dollar weak and even the Canadian showing some corrective action, it is possible that the yen is poised to take a temporary leadership role. Given the magnitude of the early October washout in the Yen and the expectation of something positive from the Chinese economic reading front on Thursday, we have to think that the Yen is poised for more gains. A normal retracement of the early October slide in the Yen, would seem to project a rise back to 111.11 and perhaps even the 50% retracement level up at 111.60.
SWISS: The Swiss has managed another upside breakout in the wake of the latest Dollar failure and it would appear that the Swiss is headed toward parity. We suspect that an exchange rate above parity will spark intervention talk but until that time, the bull camp in the Swiss looks to maintain control over the currency. Near term up trend support in the December Swiss comes in at 98.80, with uptrend channel support a bit further off the market down at 97.96.
POUND: Apparently the bull camp was able to retain control of the Pound, as the Pound has managed a fresh new high for the move in the overnight action. Perhaps the Pound was lifted by favorable mortgage lending activity in September, or perhaps the Pound is just benefiting by default from the constant weakness in the US Dollar. While the path of least resistance in the Pound seems to be pointing up, we suspect that longs in the Pound have more relative risk than the longs in the Euro, Swiss and Yen.
CANADIAN DOLLAR: The Canadian Dollar appears to have become overvalued into last week’s highs. In fact, the Canadian was seeing what appeared to be a perfect storm of macro economic and interest rate differential support and with a flurry of Canadian numbers due out today, it is possible that the Canadian exchange rate may find it difficult to stand up to reality. In other words, the Canadian numbers today might have to be stellar, just to support the December Canadian Dollar above the 96.93 level.
TODAY’S MARKET IDEAS: No sign of a bottom yet in the Dollar, primary benefactors of the ongoing Dollar weakness are the Euro, Swiss and Yen.
