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DOLLAR: With another fresh new low in the Dollar, it is clear that the trade remains convinced that the US is going to be among the last to raise interest rates. With the US economic numbers also depicting ongoing slowing and the Fed not giving off any sign of removing the punch bowl from the party, there is no reason to call for an end to the slide in the US Dollar. With the Fed seemingly playing down the slide in the Dollar, as an orderly progression and little in the way of serious complaints flowing from foreign central bankers, there just isn’t a reason to fade an entrenched down trend pattern in the US Dollar. With another new record high in gold prices overnight, it would seem like money leaving the Dollar is flowing toward the safety of the gold market. With the trade generally expecting slack, but not excessively slack US economic numbers this morning and US stocks and bonds expected to grind out more gains, the slide in the Dollar doesn’t seem to be raising any alarms. Therefore, we suspect that the December Dollar is capable of a slide down to the next downside chart target of 74.10.
EURO: Not surprisingly the December Euro has managed a quasi upside breakout on the charts this morning in the wake of the latest new low move in the US Dollar. As suggested many times over the last two months, the action in the Euro looks to be dictated by the flow of US numbers and not by the flow of numbers from the Euro zone. However, with Italian consumer confidence readings coming in stronger overnight, that probably adds to the pre-existing upward tilt on the charts. The next resistance zone in the December Euro is seen up at 150.48 and while the 150 level was supposed to be a line in the sand for the EU ministers, we suspect that the December Euro is capable of a near term upside extension to the October high of 150.62 before the ECB begins to grumble.
YEN: The carry trade continues to dominate the action in the Yen, with the December Yen spiking upward overnight to the highest level since January. With the US expected to remain mired in a slowing posture and the Japanese recently fretting openly about sustained deflationary conditions, there would seem to be little change expected in the environment that is pushing money into the Yen in an effort to capture the carry spread. Near term support in the December Yen now moves up to 113.68.
SWISS: The December Swiss has managed another pulse up trade overnight and in the process, the Swiss has reached the highest level since July of 2008. With gold also rising into another record high zone, it is likely that the Swiss and Euro are seeing a measure of flight to quality buying. In fact, we suspect that the brunt of the buying in the Swiss is flight to quality buying, with the inflation buyers making up an extremely small portion of the trade. There is little resistance in the Swiss until the even number 100 level on the weekly Swiss charts.
POUND: A big range up extension in the Pound this morning, despite the fact that the UK posted what could have been considered a disappointing 3rd Quarter GDP reading. However, the contraction in the 3rd quarter GDP readings, wasn’t as bad as expected and therefore the Pound was able to benefit from the ongoing slide in the Dollar. While we think the Pound is facing the same challenges as the US and the US Dollar, the trade is apparently upbeat toward the Pound, as long as the exchange rate is below 167.50. We can’t rule out a run up to 167.93, but one should not be looking for fundamental justification for the upcoming run up in the Pound, as there would not appear to be a respectable argument for the rally.
CANADIAN DOLLAR: A definitive downside breakout in the Dollar and a sharp upward thrust in gold prices have clearly given the Canadian Dollar a major lift this morning. With the trade and officials seemingly content with the “gradual” decline in the US Dollar, there would not seem to be a reason to stop the December Canadian Dollar from managing a near term run back above the 96.00 level.
TODAY’S MARKET IDEAS: Expect all currencies to forge consistent gains against the Dollar today.
