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DOLLAR: Apparently some of the flight to quality psychology has been tamped down for the time being as the US Dollar is seeing some profit taking in the wake of gains in international equity markets overnight. With the Dollar clearly reaching an excessive overbought technical condition on the charts recently and the extreme fear and anxiety over the global credit crisis potentially set to take at least a temporary break, it would not be surprising to see the Dollar weaker for 24 to 36 hours. As we suggested yesterday, the prospect of intervention against the Yen, the prospect of US rate cuts and some flight to quality migration toward the Swiss, all seemed to hint at a temporary pause in the somewhat historical Dollar run up. While the trade generally expects the US Fed to cut interest rates by 50 basis points there are some traders anticipating a 75 basis point cut and that type of move would probably temporarily serve to undermine the Dollar. It is also possible that a sweep of weak US data this morning could rekindle some concern toward the US economy again, and that in turn could facilitate the profit taking in the Dollar in the morning action today. Near term downside corrective action is seen at 87.61 today.
EURO: A pattern of lower highs in the Euro and interest in other currency market developments means the Euro will probably not get the brunt of the technical short covering interest in the coming two trading sessions. In fact, with evidence of slowing seen overnight from the French Consumer confidence readings, we suspect that the Euro will only forge a fleeting bounce today. With the US poised to cut interest rates and the BOE recently hinting at the prospect of rate cuts, one really gets the sense that the ECB is falling even further behind the curve and that could mean that slowing in the euro zone will continue to worsen and that the Euro zone will probably be the last to recover in the event that overall global conditions show signs of stabilizing.
YEN: Apparently the Yen was historically over wound on the upside and the threat of intervention and a tempering of the flight to quality angle seems to have prompted a backlash on the charts overnight. In fact, with the Nikkei joining the short covering pulse overnight, the flight to quality status of the Yen is at least temporarily reversed and given the historical rate of climb in the Yen recently traders should expect a rather violent corrective balancing on the charts over the coming two trading sessions. Near term corrective targeting in the December Yen is seen at 104.66 and unless the market returns to that level in the wake of the US data this morning, it is possible that the yen will hang up in a 104.66 to 105.95 range for the coming 36 hours of trade before a major trend decision is made Wednesday afternoon.
SWISS: The action in the Swiss today will be very telling, as the Swiss recently drifted into a flight to quality mode and a temporary abatement in high anxiety could have a noted impact on the currency. Clearly the December Swiss is capable of a quick slide back to quasi consolidation support on the charts around 85.61 especially if global equity markets forge impressive two day gains into the US rate cut window on Wednesday afternoon as that could mean that the Swiss falls to even lower support of 85.50.
POUND: Certainly the Pound is excessively oversold, especially given the compacted decline of the last two weeks and therefore a knee jerk bounce in the currency is possible. However, given the lackluster initial action in the Pound today the currency isn’t giving off the impression of a currency expected to come back into full favor. Therefore, we see a muted bounce to only 158.54 basis the December Pound contract. Apparently the promise of coordinated rate cuts from the UK’s Brown has failed to stir optimism toward the Pound.
CANADIAN DOLLAR: Given the historic beating of the Canadian since the late September highs, it would be hard not to suggest that the Canadian has the most technical short covering capacity of the most actively traded currencies. However, the initial response in the Canadian today is rather anemic and that suggests that the trade needs to see something even more definitively positive toward the global economic outlook, or an even more optimistic view toward commodities to mount a sustained bounce. Initial corrective capacity is only 77.95, unless equity prices really make some positive noise.
Currency Market Commentary – 2008.10.28
by Blog Admin on October 28, 2008
Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
DOLLAR: Apparently some of the flight to quality psychology has been tamped down for the time being as the US Dollar is seeing some profit taking in the wake of gains in international equity markets overnight. With the Dollar clearly reaching an excessive overbought technical condition on the charts recently and the extreme fear and anxiety over the global credit crisis potentially set to take at least a temporary break, it would not be surprising to see the Dollar weaker for 24 to 36 hours. As we suggested yesterday, the prospect of intervention against the Yen, the prospect of US rate cuts and some flight to quality migration toward the Swiss, all seemed to hint at a temporary pause in the somewhat historical Dollar run up. While the trade generally expects the US Fed to cut interest rates by 50 basis points there are some traders anticipating a 75 basis point cut and that type of move would probably temporarily serve to undermine the Dollar. It is also possible that a sweep of weak US data this morning could rekindle some concern toward the US economy again, and that in turn could facilitate the profit taking in the Dollar in the morning action today. Near term downside corrective action is seen at 87.61 today.
EURO: A pattern of lower highs in the Euro and interest in other currency market developments means the Euro will probably not get the brunt of the technical short covering interest in the coming two trading sessions. In fact, with evidence of slowing seen overnight from the French Consumer confidence readings, we suspect that the Euro will only forge a fleeting bounce today. With the US poised to cut interest rates and the BOE recently hinting at the prospect of rate cuts, one really gets the sense that the ECB is falling even further behind the curve and that could mean that slowing in the euro zone will continue to worsen and that the Euro zone will probably be the last to recover in the event that overall global conditions show signs of stabilizing.
YEN: Apparently the Yen was historically over wound on the upside and the threat of intervention and a tempering of the flight to quality angle seems to have prompted a backlash on the charts overnight. In fact, with the Nikkei joining the short covering pulse overnight, the flight to quality status of the Yen is at least temporarily reversed and given the historical rate of climb in the Yen recently traders should expect a rather violent corrective balancing on the charts over the coming two trading sessions. Near term corrective targeting in the December Yen is seen at 104.66 and unless the market returns to that level in the wake of the US data this morning, it is possible that the yen will hang up in a 104.66 to 105.95 range for the coming 36 hours of trade before a major trend decision is made Wednesday afternoon.
SWISS: The action in the Swiss today will be very telling, as the Swiss recently drifted into a flight to quality mode and a temporary abatement in high anxiety could have a noted impact on the currency. Clearly the December Swiss is capable of a quick slide back to quasi consolidation support on the charts around 85.61 especially if global equity markets forge impressive two day gains into the US rate cut window on Wednesday afternoon as that could mean that the Swiss falls to even lower support of 85.50.
POUND: Certainly the Pound is excessively oversold, especially given the compacted decline of the last two weeks and therefore a knee jerk bounce in the currency is possible. However, given the lackluster initial action in the Pound today the currency isn’t giving off the impression of a currency expected to come back into full favor. Therefore, we see a muted bounce to only 158.54 basis the December Pound contract. Apparently the promise of coordinated rate cuts from the UK’s Brown has failed to stir optimism toward the Pound.
CANADIAN DOLLAR: Given the historic beating of the Canadian since the late September highs, it would be hard not to suggest that the Canadian has the most technical short covering capacity of the most actively traded currencies. However, the initial response in the Canadian today is rather anemic and that suggests that the trade needs to see something even more definitively positive toward the global economic outlook, or an even more optimistic view toward commodities to mount a sustained bounce. Initial corrective capacity is only 77.95, unless equity prices really make some positive noise.
Tags: Currencies, Pound, Swiss, US Dollar, Yen
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