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DOLLAR: At least in the early action today, the Dollar appears to be in the midst of a further profit taking slide on the charts. Apparently the US housing news yesterday was a significant undermine of sentiment. However, the Dollar was already in the midst of a correction prior to the weaker than expected new home sales news was released. If the scheduled data was responsible for the wave of selling in the Dollar yesterday, then the market will be taking a long hard look at the claims and Durable goods data at 7:30 am this morning. However, the Senate vote on its Health Care reform bill is expected to start at 7:00 am eastern time and the outcome of that vote might be seen as an added negative to the Dollar. In other words, since the passage of the health bill became a nearer term reality, the Dollar seems to have come under pressure and therefore a passage of the bill looks to extend that bias today. While some might wonder if the Senate can get the bill passed today, one shouldn’t expect Congressman to work any overtime, as they already have guaranteed pensions and Cadillac health care in place. More downside in the Dollar today, with initial targeting seen at 77.74, unless the scheduled data disappoints and then the low today might be seen down at 77.60.
EURO: Technical short covering continues in the Euro as the fundamental shift doesn’t look to be definitive enough to justify the type of bounce seen in the Euro over the last two trading sessions. However, less concerns toward the situation in Greece seems to be contributing to the euro recover and that development alone could give the euro a sustained lift directly ahead. While a normal retracement of the December slide in the March Euro would allow a bounce to 145.67 without altering the down trend pattern, we doubt that the market is poised for that type of recovery. In fact, unless the US scheduled data is disappointing this morning it might be difficult for the March Euro to get above the next close-in resistance zone of 144.30 today.
YEN: Like the rest of the currency markets, the Yen is seeing a technical reversal of recent trends. It is possible that a series of BOJ comments overnight have fostered some fresh bargain hunting buying in the Yen, but if one looks deep into the BOJ Governor dialogue overnight, the Japanese economy continues to face serious slowing threats and that in turn could provide fundamental resistance to the March Yen directly ahead. However, a temporary recovery back above the 110 level, looks to be ahead, with a possible bounce to 110.56 possible in the coming two or three trading sessions. We continue to think that the yen might be the best currency sell for all of 2010.
SWISS: A normal retracement of the November through December washout in the March Swiss would seem to allow for a rise to 97.30 level. In fact, unless the US scheduled numbers are stronger than expected this morning, we see no reason to call for an end to the upward track on the charts. Traders should note that the March Swiss would regain its 100 day moving average at 96.90 today and that could give the bull camp a little added confidence.
POUND: While many commodities have waffled around their 50 day moving averages and the Swiss is attempting to regain its 100 day moving average, the March Pound managed to climb back above its 200 day moving average overnight. However, with the BOE recently fostering ideas that quantitative easing might be left in place and UK economic readings this week mostly disappointing, the trade in the Pound is lucky to have noted weakness in the Dollar, as buyers wouldn’t be interested in the Pound because of its fundamentals. A normal retracement of the November/December slide in the Pound, would allow for a bounce back to 1.6270 without actually derailing the downside pattern.
CANADIAN DOLLAR: We think the Canadian has clearly benefited from the recent reversal in the Dollar and to a degree it is also possible that the Canadian benefited from a recovery in oil and metals prices. At least in the near term, the losses in the Dollar should allow the Canadian to continue to win by default. Near term upside targeting is seen at 96.08.
TODAY’S MARKET IDEAS: Ongoing technical pressure to weigh on the Dollar again today and in turn that should serve to lift all Non-Dollar currencies.
