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DOLLAR: The Dollar is showing some minor recovery capacity today and we assume that is the result of short covering and perhaps some minor speculative buying ahead of an avalanche of US data. Just as US Treasuries have benefited from general slowing expectations recently, we think that the Dollar is set to get some temporary buying interest in anticipation of a soft US employment number on Friday. However, any recovery in the Dollar should be considered an opportunity to get short the Index at a more comfortable level on the charts. In short, the markets have been favoring recovery views in the wake of gains in equities and also off favorable readings in second and third tier data, but unless the Payrolls are much softer than expected and the unemployment rate jumps by more than +.2% Friday morning we doubt that the currency trade is going to consistently buy the Dollar off the idea that a double dip recession is starting to unfold. However, a hint of intervention from the ECB overnight is an issue that could add some temporary buying interest to the Dollar trade today. A normal retracement of the July through September washout in the Dollar, would allow for a recovery to 77.59, but we think the December Dollar has a temporary capacity to rise to the 50% retracement point up at 78.10.
EURO: The Euro is probably going to remain in a downward tilt for the coming 24 hours of trade as the markets fret over the prospect of sloppy numbers from the US. Adding into the downward tilt in the Euro this morning are hints that Euro zone officials aren’t entirely happy with the rate of appreciation in the Euro. However, comments from the ECB head about removing stimulus would seem to put the Euro in a very bad fundamental position in the eyes of the marketplace. Near term downside targeting in the December Euro is now seen at the 145.00 level but given the negative start today, the ECB dialogue and the fact that we have another 24 hours before the key US number on Friday morning, we now suspect that the December Euro will see at least a temporary slide below the 145.00 level.
YEN: Despite another favorable Tankan survey report overnight the Yen is at least temporarily caught in a vortex of volatility and that could mean more counter trend action in the coming 24 hours of trade. Unfortunately for the bull camp in the Yen, up trend channel support in the December Yen isn’t seen until 109.63 today, with the support level rising to 109.82 on Friday. The up trend hasn’t ended, but some counter trend action looks to be directly ahead.
SWISS: After the significant volatility of the last two weeks, the weak action in the Swiss has probably put a number of longs in a very uncomfortable position. Since the SNB was the most vocal intervention threat against the Dollar recently and the markets saw some intervention speculation from the ECB overnight, it would appear that the intervention angle has become a definitive benefit to the bear camp in the Swiss. One also has to think that the track of macro economic news is another element that favors the bear camp in the Swiss. Near term downside targeting is seen down at 95.61.
POUND: After a noted bounce off the lows early this week, we have to doubt that the Pound will continue to benefit from a series of slightly disappointing economic data points from the US. We also think that the Pound generally remains a recovery currency and that the Pound won’t fare well in the coming 24 hours of trade. Near term downside targeting in the December Pound is seen at 158.68.
CANADIAN DOLLAR: Like the Pound, the Canadian managed a pretty impressive recovery bounce over the last three trading sessions and that could leave the Canadian overvalued into some pretty important data flows directly ahead. With the Canadian sitting within relative proximity to the last three months highs and the currency also sitting in the upper portion of a long consolidation pattern, we would suggest that the bulls need some distinctly beneficial US readings in order to hold up on the charts. If you are long the Canadian, bank profits or secure temporary put protection.
TODAY’S MARKET IDEAS: Expect temporary short covering action in the Dollar directly ahead.
