The Hightower Report

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DOLLAR: The Dollar has unable to sustain any sort of recovery today, and has fallen back towards the lows of yesterday’s selloff. The global rebound in equity markets continues to dampen general risk concerns, which in turn has kept the Dollar under pressure this morning. While yesterday’s Consumer Confidence number managed to lift some of the gloom toward upcoming US economic prospects, there will be an increasing focus put on tomorrow’s US Employment report during today’s session. Even if today’s data comes in fairly positive, there may be some reluctance from the market to make any strong Dollar moves before tomorrow’s numbers are heard from. The Dollar is likely to be weak during the balance of today’s session, but should find support near the 82.25 area today, as the market waits for tomorrow’s numbers.

EURO: The September Euro has been able to continue with a recovery, supported by decent Euro zone economic data, as well as some well-received debt auctions from France and Spain today. Even with the positive tone for the September Euro, it may be difficult for prices to travel far to the upside with the shadow of tomorrow’s US Employment data hanging over the market. There may be an additional boost for the September Euro, if news from today’s European Central Bank meeting produces no surprises, but a large extension of this current rebound may have to wait until US Employment data comes out tomorrow. The September Euro may see a test of the 1.2860 level post-ECB meeting, but that may be as far as today’s strength can take the market.

YEN: While the volatility in the September Yen appears to have calmed down, the uncertainty has not as prices continue to hold their ground near the highs for the move. Although comments by the probable challenger to the Japanese Prime Minister may project a more aggressive attitude towards weakening the September Yen’s current strength, the Bank of Japan will likely have the final say when stronger measures will be applied to their problem. The erosion of safe haven support due to the global equity rebound may keep any gains for the September Yen under control, at least until tomorrow’s economic data is out of the way. Look for the September Yen to drift back towards the 119.00 resistance level during the course of today’s session, but prospects for a large downside move will increase later on this week, so a move back to today’s highs may be used as an area to enter into long put option strategies.

SWISS: A strong Swiss GDP number this morning has been able to support the September Swiss this morning, which has been weakened by the loss of safe-haven support from the global equities rally. The swift pullback from yesterday’s rally above the 99.00 level may be an indication that the September Swiss may be topping out, particularly with the threat of intervention from the Swiss National Bank, if they feel the market has become too strong. The September Swiss should continue to remain well supported, but look for a move back towards the 98.25 level before considering the long side

POUND: A weak private survey of UK housing data has added to the pressure on the September Pound, which has moved back towards the lower end of this week’s trading range. The recent contrast with UK and Euro zone economic data has not been to the September Pound’s benefit, even as the longer-term UK economic situation remains fairly positive. Look for the September Pound to move towards support near the 1.5350 level, but it should hold at those levels unless there is a major reversal in global equity market strength today.

CANADIAN DOLLAR: Calmer market conditions continue to support the Sept Canadian, even as recent Canadian economic data has lost its upbeat outlook. Given the recent volatility with the Sept Canadian, a consolidation at these levels may be of some benefit as there will likely be a large reaction to tomorrow’s US Employment numbers in any case. Look for the Sept Canadian to find support near the 95.00 level, but a strong move above this trading range may wait until tomorrow’s numbers are out of the way.

TODAY’S MARKET IDEAS: The Dollar may remain weak during today’s session, but any big moves are likely to wait for tomorrow’s US Employment numbers. The September Swiss should continue to remain strong, but a pullback towards today’s lows should be considered before entering the long side.

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DOLLAR: The Dollar has made a strong rally overnight, recovering all of the post-FOMC losses and reaching a new high for this rebound rally. An initial knee-jerk reaction towards the Fed’s actions has been replaced by a more pessimistic attitude for global economic prospects. The Dollar has been able to find some safe-haven support, particularly after a Chinese government planning agency stated their expectations for the US recovery to continue while casting doubt on the Euro zone and Japan. With the global selloff in equities during overnight hours, this current Dollar strength may be extended well into today’s trading. If sentiment continues to deteriorate, the market may be at a turning point for the Dollar’s longer-term direction. For now, look for the Dollar to find resistance near the 82.00 level as this rally gains more momentum.

EURO: The September Euro has come under heavy pressure over the past few hours, and has fallen further away from the recent highs for the move. With the Fed already dampening sentiment for the global markets, today’s statements from the Chinese towards the Euro zone are in sharp contrast to the optimism from earlier in the month. With risk concerns becoming more of a factor as the week goes on, this current plunge is likely to gain further momentum. The September Euro should find support near the 1.2980 level, but a further acceleration to the downside may occur if the markets cannot shake today’s negative tone.

YEN: Today’s flare up in risk has helped the September Yen to approach new 15-year highs, in spite of recent weak Japanese economic data. With authorities in Japan appearing to be more tolerant of recent Yen strength, there may be a test of those highs soon if the global move out of equities picks up steam. Look for the September Yen to find resistance at the 117.90 level, but a move beyond that area may need further deterioration from other markets.

SWISS: The September Swiss has not able to benefit from heightened risk concerns with the markets, giving back a good portion of yesterday’s late recovery. With other problem areas taking the market’s attention, relatively good economic condition in Switzerland may help to support the September Swiss during this market turbulence. The September Swiss is likely to find support near the 94.60 level, but any strong move back towards the highs may require a major improvement with global sentiment.

POUND: Yesterday’s late revival of the September Pound has been reversed this morning, as elevated market risk has derailed the longer-term rally. A report from the Bank of England which projects low inflation levels going forward has added to the pressure, and sent the September Pound diving to new lows. Look for the September Pound to test support near the 1.5660 this morning, but will need a vast turnaround in sentiment in order to reverse this selloff.

CANADIAN DOLLAR: The revival of risk concerns with the market continues to plague the Sept Canadian, which has returned towards yesterday’s lows over the last few hours. There may be little chance that the Sept Canadian can turn this downmove around as long as global equity markets are under pressure, but the generally positive view towards the Canadian economy may be enough to keep this slide from getting out of hand. Look for the Sept Canadian to find support near the 96.18 level during today’s session.

TODAY’S MARKET IDEAS: The Dollar will continue to gain ground, as long as sentiment for global markets remains weak. The September Yen will also benefit from risk aversion support, but look for the September Swiss to make a turnaround if risk concerns can be dampened over the next few hours.

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DOLLAR: The Dollar appears to be coming out of a volatile overnight session with some strength, and has been grinding higher. US equities have been weak, and the positive vibe out of the Euro zone may be eroding with a rumor that at least one German bank might fail the stress tests. There is one US economic number today to digest, but Housing Starts have been a chronic sore spot for the US economy and that may add to the darkening tone for the markets. While there may not be enough on today’s plate to change the direction of the overall trend for the Dollar, it appears now that new lows may be off the table for now. Look for the Dollar to find resistance up near the 83.05 level, but any further upside move from there, may require some solidly negative news outside of the US to sustain an upside thrust.

EURO: Today’s well-received debt auctions from Spain and Greece helped to send the Sept Euro up to a new high for the move, but a change in direction has sent prices back below the 1.30 in a hurry and that action seemed to be the result of weakening global equity prices. Talk that a German real estate bank might fail the EU’s stress test may be applying some pressure to the Euro, although the actual results will not be released until Friday. Whether this change in sentiment will be enough to fully derail the current longer-term rally attempt in the Euro remains to be seen, but weakening equity prices on both sides of the Atlantic are not helping the Sept Euro’s cause. Look for a further pullback for the Sept Euro down to the 1.2870 level, but the longer-term rally may have enough underlying support to withstand today’s temporary pressure.

YEN: In spite of the elevated risk concerns out of Europe this morning, there has not been much benefit to the Sept Yen so far. With prices already at high levels from the recent sharp rally, there may be signs that the current move may be topping out. While the Sept Yen will likely move back into positive territory from safe-haven support, prices will likely find resistance around the 115.70 area, as the upside momentum appears to be leveling off.

SWISS: While Swiss Trade numbers today indicated a larger surplus than expected, the Sept Swiss has been unable to gain ground due to the carryover pressure from fresh Euro zone problems. There may be some cause for concern, as profit-taking may become heavy if the 94.75 level is taken out today. The Sept Swiss should hold that area today, but there is a distinct possibility of getting swept up in a European liquidation sell off.

POUND: The Sept Pound has been consistently drifting further away from the recent highs, with today’s UK Public Sector borrowing numbers adding an additional negative tone to the market.
The longer-term up trend should remain intact, but there are concerns that pressure on the Euro zone may eventually entangle the Sept Pound in any extended sell off. The Sept Pound may continue to descend towards the 1.5140 level this morning, but it should find support down at those levels.

CANADIAN DOLLAR: Although the elevated risk concerns have taken prices off of their highs, the Sept Canadian has been able to hold its ground, as the market prepares for this morning’s Bank of Canada meeting. There is a general consensus that Canadian interest rates will move higher today, so anything short of that will obviously be a problem. Look for the Sept Canadian to hold the 94.50 support level before the BOC meeting, then we expect the September Canadian to move back above the 95.00 level when and if the rate hike is announced.

TODAY’S MARKET IDEAS: The Dollar should hold this current strength during the course of today’s trading, as risk concerns may provide ongoing support during today’s session. The Sept Swiss is likely to have the best chance of regaining positive territory, and look for the Sept Canadian to see a post-rate hike rally.

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DOLLAR: The Dollar has been able to move away from 2-month lows, and it also hasn’t shown any inclination to make any sort of extended recovery. Equity markets have held their ground and might try to move higher again today and that has kept the Dollar off balance. As tensions continue to ease going into the weekend, it may be increasingly difficult for the Dollar to make a dramatic turnaround from its current downward drift. There is always the chance of a surprise news item sending the markets into frenzy, but what currently is on the near-term horizon does not appear to have the potential impact needed to change sentiment on a summer Friday. As long as the tone of the markets remain subdued, the Dollar may grind its way lower with any upside potential capped at the 84.25 level, as the markets finish out the week.

EURO: The Sept Euro has not been able to hold near the 1.27 level so far today, but it does look set to finish out the week in a much better position than it held at the end of June. Recent bank stress tests new items have helped to revive positive sentiment for the Euro zone, even if their criteria may not have been as stringent as the market would have hoped for. With the risks of a debt contagion still being dampened, the Sept Euro should be able to hold these current levels but an end-of-week liquidation move lower is certainly not out of the question later today. Look for the Sept Euro to descend towards support at the 1.2625 level, but the current up move will likely remain intact going into the weekend.

YEN: The Sept Yen continues its tumble from recent highs, and is clearly on the defensive this morning. Although the erosion of safe-haven support has been a key factor, the increasing likelihood that the current government will suffer a setback in upcoming Japanese elections has also weighed on the Sept Yen. While the chances are that this sell off gains momentum next week, the Sept Yen may be limited today to a move towards support around the 112.50 area.

SWISS: Although there has been no major change in the fundamentals, the Sept Swiss has come under pressure this morning, as profit-taking has sent prices away from the highs. The rapid climb over the past month has left the Sept Swiss vulnerable to this sort of price action, but the overall trend remains solidly toward the upside. Further liquidation pressure may take the Sept Swiss below the 94.40 area, but any move of that size would likely present a longer-term buying opportunity.

POUND: The Sept Pound has been able to hold within the current trading range, showing little impact from this morning’s UK economic data flow. The focus for the Sept Pound continues to be on budget austerity measures by the UK government, which provides a strong contrast with the approach being used by the US government. While there may not be enough momentum this late in the week for a test of the highs, the Sept Pound should be able to hold support at 1.5150 as further gains should be expected for this move next week.

CANADIAN DOLLAR: The Sept Canadian will likely take its cue from today’s positive Canadian Employment numbers, as strong economic conditions have been the main supportive factor for the Canadian over the past few months. If overseas risk factors remain quiet, there may be an increased chance that the current rally can be sustained, as risk concerns have derailed the Sept Canadian several times during this period. Look for the Sept Canada to hold support near 95.50 as the chances of upcoming Canadian rate hikes remain strong.

TODAY’S MARKET IDEAS: The Dollar may not have enough momentum for a strong upside move, but should be able to hold overnight gains. Look for any pullbacks in the Sept Swiss and Sept Pound.

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DOLLAR: After showing some overnight strength, the Dollar turned around and moved lower this morning, reaching the lowest level since the middle of May. There has been a change in tone, as the results of today’s sovereign debt auctions in Spain and France were well received by the market and that has apparently dampened market fears of further problems in the Euro Zone. While the chances that a longer-term change in direction for the Dollar will require time and further substantive actions, the recovery in equity markets on both sides of the Atlantic will likely keep the Dollar bulls on the defensive this morning. Today’s US economic numbers will give the market plenty to digest later in the session, so we may not have seen the last of today’s volatility. However, the Dollar looks to be on the defensive going into the opening and may need some positive news of its own to find some support. With momentum against it, look for the Dollar to find support down near the 85.75 level.

EURO: While today’s sovereign debt auction in Spain indicated plenty of demand from the marketplace, the potential of a 4.86% yield from a Euro-denominated 10-year bond may have had a lot to do with today’s enthusiasm as well. In any case, the Sept Euro has found plenty of strength from the auction results both in Spain and France and therefore the Euro bulls looks to have the upper hand for today’s session. With the Euro now reaching towards the highest levels since late May, however, it will be interesting to see whether this week’s recovery has enough momentum to achieve an upside breakout. The Sept Euro is likely to make a test of resistance near the 1.2430 level during today’s session particularly if today’s US economic numbers give a boost to the equity markets both in the US and in Europe.

YEN: The change in market tone for the Euro Zone may ultimately put pressure on the Sept Yen, but prices have been able to hold up well this morning in spite of the change in Euro Zone sentiment. Look for the Sept Yen to find support around the 109.45 area, as it appears that safe-haven support may not exit the trade quickly.

SWISS: The news highlight of today’s Swiss National Bank meeting was the removal of a pledge to intervene against excessive gains against the Euro. This had the effect of a sharp rally, taking the Sept Swiss above the 90.00 level very quickly. Although the market may have lost upward momentum, the overnight gains have held up fairly well going into the US opening. While the move higher was fairly quick, look for the Sept Swiss to make a further move up to the 90.25 area, if the positive vibe for Europe can sustain itself through today’s US report slate.

POUND: With the market’s attention on other areas of Europe this morning, the Sept Pound has not found much in the way of carryover support although there has been a large recovery from overnight lows. Even with a stronger UK Retail Sales number this morning, look for the Sept Pound to lag behind the Euro and the Swiss as the unwinding of cross-spreads may keep the pressure on.

CANADIAN DOLLAR: If today’s Euro Zone debt auctions play a role in dampening risk aversion throughout the markets, then the Sept Canada should be a major beneficiary. The monthly survey of Canadian Manufacturing may prove to be a hurdle after the opening, but Canadian economic numbers have been relatively strong over the past few months. Look for the Sept Canada to make another test of the highs at 97.75 this morning, especially if economic numbers on both sides of the US/Canada border are strong.

TODAY’S MARKET IDEAS: The Dollar is likely to stay under pressure this morning, especially if there are no negative surprises from the US economic numbers later on in the day. The Sept Swiss should remain well supported this morning, but the Sept Canada still looks to have the most upside potential from present levels.

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DOLLAR: Even though the Dollar has moved lower this morning, it remains near the high end of the recent rally, as there has been little conviction for a wholesale removal of a risk aversion premium. There was little direction offered from yesterday’s divergent statements by US Fed officials, so with another day lacking major US economic numbers to digest, the Dollar will once again take most of its cues from overseas events. The situation with the Euro Zone is nowhere near a solution, but the lack of any fresh negative flare-ups this morning may keep the Dollar on the defensive versus the Europeans. If the current rumors of a strong Chinese export number tonight come to pass, then the resulting support for world equity markets will also put some pressure on the Dollar. The markets has shown they have little tolerance for any potential problems, but as long as there are no further market tensions, the Dollar will likely remain on the defensive this morning. Look for the Dollar to move towards support near the 88.50 level, but substance will be needed in order for prices to make an extended run lower to last month’s trading range.

EURO: As long as the Euro Zone smolders instead of burns, the Sept Euro has been able to lift itself away from the recent plunge in value. Given the general lack of confidence in the EU’s crisis prevention package, it is interesting to note that the Sept Euro has so far been able to avoid a further move beyond Monday’s low of 1.1884. Statements by Hungarian political leaders appear to have put out the risk aversion fires from that area, so as long as there are no new flare-ups, then the Sept Euro may be able to build upon today’s initial strength. If the lackluster tone of world equity markets can be turned around as well, then that could be seen as a positive for the Sept Euro as well. A test of resistance above the 1.2000 level is likely during today’s session, but an extended move higher will need some additional positive Euro Zone news.

YEN: The gradual erosion of risk aversion support this morning may keep the Sept Yen on the defensive this morning, but there does not appear to be much urgency with exiting a safe haven currency. While the Japanese government would like to see a lower Yen valuation from here, the market will likely need to have more confidence in the Euro Zone before a test of last week’s lows will occur. However, today’s tone for the Sept Yen still looks to be negative, and a move towards support around the 109.00 level would not be out of the question.

SWISS: After not showing its hand through new record highs against the Euro, the Swiss National Bank appeared to intervene at the 1.3750 Swiss/Euro level during yesterday’s session. This may be an indication that they are willing to accept a higher valuation for the Swiss Franc, as long as the moves are gradual. The Sept Swiss continues to build upon recent strength, and is likely to make a run at the 87.60 resistance level, as the first step towards an extended move to the upside.

POUND: The Sept Pound has been able to recover from yesterday’s sell off, as the market has been able to digest the credit rating agency warning in stride. Look for the Sept Pound to head to resistance around 1.4530 this morning, but it may have trouble getting beyond that area as concerns over European issues will continue to weigh on the Pound.

CANADIAN DOLLAR: Sept Canada has been able to benefit from the easing of risk tensions in the market, and looks to be on the verge of rising past the 95.50 resistance level. As long as financial markets remain quiet, the Sept Canada is likely to continue grinding slowly higher but it remains the most likely candidate for a renewed sell off if any negative news story from Europe hits the market.

TODAY’S MARKET IDEAS: The Dollar is likely to remain weak this morning, as long as news headlines remain subdued. The Sept Swiss looks to be ready for an extended move higher, but may need a successful test of the 87.60 level before accelerating further to the upside.

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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.

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DOLLAR: The Dollar has been able to extend its rally to new highs this morning, although the market appears to have calmed down somewhat from yesterday’s turbulence. European issues continue to be the center of attention, as an inability to resolve the Greece debt situation fully has no doubt fueled speculation of problems in other EU nations this week. While the relative strength of economic numbers between the US and Europe has not produced that much of a contrast, it has been the continuation of problems from the EU, real and imagined, that has left the Dollar the beneficiary of risk aversion support. If today’s trading remains calm, the Dollar may lose some minor ground through profit-talking but there seems to be little on the near-tern horizon that can totally shake the Dollar’s underlying strength over the near-term. Look for the Dollar’s downside to be limited to a pullback to 83.20 at most, as the market’s concerns with Europe remain unanswered.

EURO: Although the descent has moderated, the June Euro remains below the 1.30 level this morning, as the market tries to digest the severity of yesterday’s sharp down move. Comments made by the EU Economic Commissioner this morning has struck the right tone, particularly in regards to Greece and its problems, but there may be more attention paid to German legislators, as they begin debating a bill for the Greece aid package. With so much ground covered so quickly, there is a good chance that the June Euro could see a sharp short-covering rally over the next day or so. Unless sentiment changes drastically, however, those types of price moves should be used as selling opportunities, as problems in Europe look to have placed a ceiling on the June Euro’s upside for now.

YEN: As the risk aversion trend has calmed down in the markets, the June Yen has returned to its downtrend posture this morning. It is interesting to note that the June Yen has made fresh lows despite lingering flight to quality issues and that is a very telling sign that the bull camp really isn’t interested in the Yen. However, it would appear that the market is somewhat reluctant to test the 105.00 level coming out of the Golden Week holidays in Japan. With European weakness providing some measure of support for the June Yen, it may be difficult for prices to probe the downside today, but it seems unlikely that the market can avoid a breech of 105.00 level during the near future.

SWISS: It may be surprising given the relative strength of the Swiss economy to its European neighbors that the June Swiss should be on the verge of 1-year lows against the Dollar, but that may be the price paid by the Swiss National Bank for consistent intervention. As long as European debt problems hold the market’s sway, it is likely that the June Swiss will remain under considerable pressure. Look for a test of the 90.00 level by the June Swiss over the remainder of the week.

POUND: While the June Pound found itself caught up in the risk aversion sell off yesterday, prices have lifted themselves off of their lows today as the Pound has gained some ground against the Euro. This would be considered the calm before the storm, as the market prepares itself for tomorrow’s UK election. A late rise in the polls by the ruling Labour party has added to the uncertainty over the ultimate results, although much of those gains have come at the expense of a third party. The June Pound is likely to remain within a range between 1.51 and 1.52, although there is a possibility of a sharp move, if late polls show a decisive move for any of the three major parties.

CANADIAN DOLLAR: The calming of the forex markets after yesterday’s risk aversion tidal wave have allowed the June Canada to find some support this morning, albeit at its lowest levels since late March. If the European debt situation can stay out of the headlines today, then the June Canada stands a good chance of building on this morning’s bounce off of the lows. Look for a move towards the 98.00 level in the June Canada over the course of today’s trading.

TODAY’S MARKET IDEAS: While the markets have calmed down, the European currencies clearly remain on the defensive. In addition, the move away from risk aversion may now drive the June Yen towards a test of the 105.00 level.

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DOLLAR: The Dollar has retained its safe haven strength this morning as a lack of progress in resolving a now expanding European sovereign debt crisis may be adding to a capital flight out of Euro-denominated assets and into the US Dollar. While the chances for a full default are still remote, the loss of investment grade status on Greek debt creates its own set of problems for many investment firms who are unlucky enough to still be holding those issues. Equally frightening to the market was the Portuguese credit downgrade yesterday, which may only be starting to have a Greek-type decline, but as yet has an unknown price tag for the EU. With events in Europe holding the market’s focus, the FOMC announcement later today has probably lost some of its relevance but it would seem almost impossible that the Fed would make any sort of move in the wake of yesterday’s events. As long as EU debt concerns hold the market in its sway, the Dollar will remain well supported across the board. Unless there are concrete moves towards a solution to this crisis and that doesn’t look to be in the cards today, look for the June Dollar to hold its gains above the 82.50 level and perhaps make even more new highs for the move.

EURO: The June Euro remains under pressure this morning as a resolution to the EU sovereign debt crisis still appears to be far away. The May 19th deadline for Greece to find some sort of aid package in order to roll out some longer-term debt may provoke some sort of compromises over the next few weeks, but as long as political posturing on both sides takes center stage, the June Euro is likely to be remain under selling pressure for the near future. While the chances for a sharp short-covering rally rise whenever officials start to make statements, look for the June Euro to continue its descent past the 1.3120 level unless concrete steps are put into place quickly. The Germans don’t want Greece to get off easy, but they might have already shot themselves in the foot by allowing the Greece crisis to undermine the situation in Portugal.

YEN: The benefit that the June Yen was receiving from European weakness has been turned around overnight, as risk aversion strength may have been offset by ideas that many in the government are looking for a weaker Yen in order to stimulate the deflationary Japanese economy. Unless there are further problems in Europe today, look for the June Yen to head back towards the 106.00 level.

SWISS: The June Swiss has been fairing the best of the European currencies as a flight-to-safety finally appears to be giving the Swiss some benefit. While the Swiss National Bank is likely to be keeping any gains versus the Euro in check, look for the June Swiss to hold its lows above the 92.00 level.

POUND: Politics has finally taken a back seat for the June Pound as it has been caught-up in the general weakness in European currencies. Although the ideas that the UK will be caught up in the sovereign debt contagion are a stretch at best, it does point to the fiscal problems that the new government will have to contend with after the May 9th election. While the June Pound should benefit from any Euro-related rally, look for any gains to be capped off around the 1.53 level unless there are new UK election-related developments.

CANADIAN DOLLAR: The June Canada has had the worst performance of the major currencies since the European credit-downgrades, as the risk aversion wave has caused a flight out of riskier currencies like the June Canadian. With the economic situation in Canada remaining positive, any sort of support found near these levels may be the start of an eventual move higher but recent price action should lead any longs to proceed cautiously.

TODAY’S MARKET IDEAS: A relief rally may take the European currencies off of their lows, but unless the market sees a solution to the EU debt crisis on the horizon, the Dollar is likely to hold its strength over the near future.

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DOLLAR: The Dollar has seen some benefit from the turbulence overnight in the markets and it might take rather stellar US economic data this morning to rekindle interest in riskier Non Dollar instruments. It looks as if today’s flare-up in the Greece debt situation may provide another round of flight-to-quality support for the Dollar today, but the lack of fresh domestic news over the past few days, has seemingly allowed global macro economic psychology to deteriorate. We aren’t even sure if the US economic readings will be able to countervail fears toward the Euro zone today! With the US equity markets also losing their upward momentum, along with weakening in several key physical commodity prices, the interest in riskier assets is highly suspect. Therefore conditions today are likely to keep the US Dollar well supported through the day, as good US data might not prevent a move back toward the 82.00 level later today.

EURO: The news that Greece’s deficit for 2009 was being revised up to 13.6% of their GDP has sent the June Euro tumbling lower again, as that put the EU/IMF aid package squarely into the markets focus this morning. With the added effect of sending Portuguese default swaps to record high levels, news that negotiations between Greece and their EU/IMF benefactors may take up to three weeks to hammer out details, raises plenty of uncertainties. The recent string of good Euro Zone economic data points may be helping to put the brakes on this move lower, but as long as the Greece debt issue holds center stage for the June Euro, it is difficult to see this market throw off the downside bias on the charts. In fact, without stellar US numbers and perhaps even a recovery in US equities the June Euro might not be able to avoid a retest of this year’s lows this week.

YEN: A report from a credit agency expressing concern over Japan’s creditworthiness put the June Yen under mild pressure overnight, but the Yen has found some support from the weakness in European currencies. This sort of news underscores how the relatively weak economy in Japan will certainly need to see lower interest rates over the near future. While the longer-term outlook may be negative, today’s events in Europe may help to keep the June Yen supported above the 107.50 level unless US economic data is shockingly good.

SWISS: European weakness this morning is dragging the June Swiss down, as it does not appear as yet to be receiving any support from the Greece deficit revisions. The decent Swiss trade numbers earlier in the morning gave the Swiss some support, but it appears that the June Swiss may be sizing up a move back below the 93.00 level during the next few hours.

POUND: The June Pound continues to find some support from UK retail sales data, and will likely find some benefit from today’s problems in the Euro as well. With today’s second electoral debate keeping the political impact on the June Pound quiet over the next few hours, the June Pound should at least stay well supported against the other European currencies but perhaps weak against the US Dollar and the Yen. A run at the highs near 1.5520, is likely to be prevented today in the face of lingering concern for the pace of the global recovery.

CANADIAN DOLLAR: June Canada continues to frustrate the market by failing to hold moves above the 100.00 level. In spite of solid economic data and the Bank of Canada’s clear intent to show Canadian interest rates will be heading higher, the June Canada may have difficulty holding these levels if today’s events in Europe bring back risk aversion top non Dollar assets. While a move back to Monday’s lows is highly unlikely over the near-term, the June Canada may need to see a move back down to 99.60 before the long side can be looked at again.

TODAY’S MARKET IDEAS: The Dollar is likely to stay well supported this morning, particularly against European currencies.