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DOLLAR: Although it has had a bumpy night, the Dollar has returned toward unchanged levels as we approach the opening. Most of the volatility has occurred during European hours, as a lack of clarity towards the direction of Euro Zone economic policy has left the market looking for any sense of direction. The comments by Eurogroup Chairman Juncker that there is no need to take immediate action to stem the Euro’s rapid fall in value are in sharp contrast to recent German action, particularly with the unilateral step of banning short selling of Euro Bonds and related credit default swaps. While the rapid Dollar rise over the past few days left prices vulnerable to the sort of pullback that we saw yesterday, there appears to be plenty of risk aversion still left in world markets to prevent a full-scale change in bullish Dollar sentiment. Unless there are some big surprises in today’s US economic numbers, look for the Dollar to hold onto its safe-haven status and find very solid support near the 86.40 level.
EURO: With this week’s German show of strength being undercut by recent comments by the Eurogroup Chairman and the French Economic Minister, the chances for the June Euro building up enough support for a return to the 1.25 level by the end of the week may have eroded as well. Even if the rest of the EU comes over to the German style of hard-line Euro support, the market has already sensed enough uncertainty with the course of current action, to likely mitigate any benefits found with a unified front. Baring concerted intervention to support the Euro, which becomes more of a possibility if we see new lows during the near future, expect the June Euro to remain on the defensive during the course of today’s trading, with a further move back below the 1.23 level a very likely result.
YEN: While the Japanese GDP number overnight was a mildly supportive factor, the June Yen may be finding more benefit from the repatriation of Japanese funds out of riskier areas such as Europe, Canada, and Australia. Even so, the June Yen’s moves above the 110.00 over the past few days may be a bit ambitious, given the ongoing deflationary Japanese economy and a government calling out for a much weaker Yen valuation. As long as the Euro Zone situation remains volatile, the June Yen should continue to find safe-haven support but will likely find resistance near the 110.00 level over the next few days.
SWISS: The June Swiss suffered a huge setback against the Euro as a failure to find a new all-time high against that currency caused a huge reversal in that spread. Now that the Euro is on the defensive this morning, the June Swiss is likely to outperform the other European currencies but it will likely need a major change in Dollar sentiment to have prices return towards last week’s levels. The June Swiss should remain well supported today, but may find resistance up near the 87.60 level.
POUND: A weak UK Retail Sales number has added to the pressure on the June Pound this morning, as the flows out of riskier currencies have now seen a move against the Pound. Until the new UK government puts out their fiscal plans, the market will likely find doubt over their eventual success in reviving the British economy. Look for the June Pound to remain on the defensive today, with the market finding resistance near the 1.4450 level.
CANADIAN DOLLAR: June Canada continues to be pressured by events in Europe, as the market’s aversion to riskier currencies has helped to send prices down towards their range during the May 6th meltdown. Until Euro Zone problems calm down, it is unlikely that the June Canada will be able to hold onto any support level for an extended period of time. The June Canadian may find support near the 94.50 level this morning, but will be unlikely to make a move above the 96.00 level, unless there is a drastic change in broad market sentiment towards the “so-called” riskier currencies. Even a slight tempering of the Euro situation could lead to a massive recovery in the Canadian.
TODAY’S MARKET IDEAS: At this point, it appears that the Dollar is gaining the upper hand again as risk aversion continues to influence the markets. Look for the June Euro and June Pound to remain under pressure, while the June Yen should hold limited support during today’s trading.
Currency Market Commentary – 2010.05.20
by Dave Hightower on May 20, 2010
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: Although it has had a bumpy night, the Dollar has returned toward unchanged levels as we approach the opening. Most of the volatility has occurred during European hours, as a lack of clarity towards the direction of Euro Zone economic policy has left the market looking for any sense of direction. The comments by Eurogroup Chairman Juncker that there is no need to take immediate action to stem the Euro’s rapid fall in value are in sharp contrast to recent German action, particularly with the unilateral step of banning short selling of Euro Bonds and related credit default swaps. While the rapid Dollar rise over the past few days left prices vulnerable to the sort of pullback that we saw yesterday, there appears to be plenty of risk aversion still left in world markets to prevent a full-scale change in bullish Dollar sentiment. Unless there are some big surprises in today’s US economic numbers, look for the Dollar to hold onto its safe-haven status and find very solid support near the 86.40 level.
EURO: With this week’s German show of strength being undercut by recent comments by the Eurogroup Chairman and the French Economic Minister, the chances for the June Euro building up enough support for a return to the 1.25 level by the end of the week may have eroded as well. Even if the rest of the EU comes over to the German style of hard-line Euro support, the market has already sensed enough uncertainty with the course of current action, to likely mitigate any benefits found with a unified front. Baring concerted intervention to support the Euro, which becomes more of a possibility if we see new lows during the near future, expect the June Euro to remain on the defensive during the course of today’s trading, with a further move back below the 1.23 level a very likely result.
YEN: While the Japanese GDP number overnight was a mildly supportive factor, the June Yen may be finding more benefit from the repatriation of Japanese funds out of riskier areas such as Europe, Canada, and Australia. Even so, the June Yen’s moves above the 110.00 over the past few days may be a bit ambitious, given the ongoing deflationary Japanese economy and a government calling out for a much weaker Yen valuation. As long as the Euro Zone situation remains volatile, the June Yen should continue to find safe-haven support but will likely find resistance near the 110.00 level over the next few days.
SWISS: The June Swiss suffered a huge setback against the Euro as a failure to find a new all-time high against that currency caused a huge reversal in that spread. Now that the Euro is on the defensive this morning, the June Swiss is likely to outperform the other European currencies but it will likely need a major change in Dollar sentiment to have prices return towards last week’s levels. The June Swiss should remain well supported today, but may find resistance up near the 87.60 level.
POUND: A weak UK Retail Sales number has added to the pressure on the June Pound this morning, as the flows out of riskier currencies have now seen a move against the Pound. Until the new UK government puts out their fiscal plans, the market will likely find doubt over their eventual success in reviving the British economy. Look for the June Pound to remain on the defensive today, with the market finding resistance near the 1.4450 level.
CANADIAN DOLLAR: June Canada continues to be pressured by events in Europe, as the market’s aversion to riskier currencies has helped to send prices down towards their range during the May 6th meltdown. Until Euro Zone problems calm down, it is unlikely that the June Canada will be able to hold onto any support level for an extended period of time. The June Canadian may find support near the 94.50 level this morning, but will be unlikely to make a move above the 96.00 level, unless there is a drastic change in broad market sentiment towards the “so-called” riskier currencies. Even a slight tempering of the Euro situation could lead to a massive recovery in the Canadian.
TODAY’S MARKET IDEAS: At this point, it appears that the Dollar is gaining the upper hand again as risk aversion continues to influence the markets. Look for the June Euro and June Pound to remain under pressure, while the June Yen should hold limited support during today’s trading.
Tags: Dollar, Financials, Pound, Swiss, Yen
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