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DOLLAR: After a two-sided night of trading, the Dollar finds itself slightly weaker going into the US opening. The risk aversion theme that has kept the Dollar close to 14-month highs may be fading somewhat as the market approaches the holiday weekend, but there are plenty of factors still in play that are likely to keep any extended move lower from occurring during this session. Comments from Chinese officials on the Korean situation and how European debt problems will affect the global economic recovery have reinforced the Dollar’s safe haven support, although that may dissipate if the general recovery in world equity markets extends itself into today. Today’s US Personal Income numbers may provide some direction if they surprise the market, but there are too many unresolved areas of concern for the market to contemplate a full scale Dollar retreat. Look for the Dollar to hold support near the 85.75 level, but the Dollar will still need some substantial news in order to move any further to the downside.
EURO: Although the June Euro has been able to extend yesterday’s recovery, much of that move has been due to end-of-month rebalancing in front of the holiday weekend. With the Chinese placing blame on European debt problems, and with news that the city of Rome was placed on a negative credit rating watch yesterday, the burden of proof for a recovery has been placed squarely on the June Euro’s shoulders. If world equity markets can find enough strength to have a second day of large gains, there may be some hope of a move beyond 1.25 but the concern of being long over a holiday weekend may act to limit any upside potential. The June Euro is likely to find resistance near the 1.2450 level, but the June Euro will need a new catalyst for an extended move towards the upside.
YEN: Already pressured by the erosion of safe-haven support, the June Yen was forced to deal with two negative Japanese economic numbers overnight. Japanese Unemployment was higher than expected, while the Japanese CPI had a larger than expected decline. With both numbers pointing towards an economy that needs to be revived quickly, the gains that the June Yen has posted over the past few weeks have to be seen as a huge economic liability. While the approaching holiday weekend may keep prices somewhat supported, the June Yen may look to again trade near support around the 109.40 level as quieter news and stronger equity markets remove a great deal of its risk aversion strength.
SWISS: A stronger than expected Swiss Leading Indicator number this morning may illustrate the relative strength of their economy versus the rest of Europe, but may have little in the way of immediate impact, as the Euro continues to recover this morning. Even so, look for the June Swiss to make a run at resistance levels near the 87.40 level, as a quieter pre-holiday trade should insure that the lows for the move have been put in earlier in the week.
POUND: The June Pound’s breakout of the recent trading range has seen little in the way of follow-through this morning, but prices have been able to withstand a weaker than expected UK Consumer Confidence number from last night. There appears to be enough positive pan-European sentiment out in the markets to hold the June Pound in positive territory, but the lack of upside momentum going into a holiday weekend should leave prices finding resistance near the 1.4650 level.
CANADIAN DOLLAR: June Canada continues to extend a recovery rally into today’s session, as the move away from risk aversion has been a major supportive factor for the commodity currencies over the past few days. With a relatively strong economic situation already in place, the June Canada is likely to see this move hold going into the weekend. Look for the June Canada to make a run at resistance near the 95.90 level, as quieter markets reinforce the strength of its recovery.
TODAY’S MARKET IDEAS: While the Dollar may be under pressure at the moment, the volatile trade overnight may indicate that caution be applied to holding any long position in the European currencies. Look for the June Canada to extend its recovery rally going into the weekend.
