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DOLLAR: The Dollar appears to be holding just above the prior lows as if it is waiting for the final judgment on the Greek 10 Year debt offering. At least from the early indications, the debt offering went off fairly well and when one combines that sentiment, with the potential for decent US economic news, that could leave the bear camp with the near term edge in the Dollar. However, the Dollar might not fall aggressively because of the presence of the ultra critical US Non Farm payroll report on Friday morning. It is also possible that the Dollar is set to get some minor support from the latest Chinese tightening effort, but that support will probably be totally washed away because of another push in the US for the Volcker rule. In our opinion, pushing for the Volcker Rule should mean that some money will decide to flee the US Dollar. In conclusion, the bearish items seem to easily out number the bullish items, with favorable US data likely to continue lifting oversold Non Dollar currencies. Critical support in the March Dollar index is seen at 79.97 but a decline down to 79.75 would not be surprising today.

EURO: The Euro was recently oversold technically and perhaps under excess fundamental pressure. While the final results might offer up a surprise, the initial results from the Greek debt offering seem to have been good enough to keep anxiety levels low and that could provide the Euro with a further short covering lift. Unfortunately, Euro zone GDP readings overnight showed a gain of only +0.1% and the trade saw fresh Chinese tightening moves overnight and that seems to be limiting the Euro in the early going today. However, the Euro needs help to rally and we doubt that the rate decision from the ECB will offer any surprises, but we do think that favorable US numbers could prompt some additional buying of the March Euro. Initial support in the March Euro is seen at 1.3654 and there is a chance of a fresh new high for the week if the US numbers are positive.

YEN: The March Yen managed another range up move in the overnight action but it would appear that the Yen is managing the gains off information that might have been seen as bearish earlier in the week. Perhaps news of an earthquake in Taiwan overnight provided the Yen with a lift and perhaps the currency trade is expecting a disappointing US Non farm payroll reading on Friday morning. In any regard, we have been suggesting all week that the Yen was capable of rallying sharply this week and it wouldn’t be surprising to see a spike high and failure above the 114 level.

SWISS: The Swiss seems to be poised to rally but we get the sense that the rally would be mostly technical short covering. However, a temporary calm in the Greece situation and improved economic views toward the US recovery would probably prompt the March Swiss to rally back above the 94.20 level. For the time being, being long the Swiss is like being long the world economic outlook.

POUND: The Pound continues to benefit from a leveling of the Greece debt crisis and perhaps because of a slight improvement in the US economic outlook. In retrospect, one might also suggest that sentiment toward the Pound and the UK economy was really negative early in the week and therefore some short covering is deserved in the Pound. However, a UK Halifax house price reading for February fell overnight and therefore the bull camp in the Pound probably needs some help from world equity markets and also from the US economic report front. The March Pound would seem to have little resistance until the 1.5150 level, but being long the Pound, might mean really good numbers lift the currency slightly, while slack numbers resume aggressive selling interest.

CANADIAN DOLLAR: The Canadian Dollar remains in a bullish fundamental and technical posture. However, the Canadian is somewhat short term overbought and seemingly in need of a patently supportive US economic report flow to manage more gains straight away. The Canadian is sensing forward progress on the global economy, but we are a little uncomfortable suggesting fresh long plays in the upper quarter of the last 5 1/2 month trading range. Long term, we are bullish but buying at this level on the charts feels risky.

TODAY’S MARKET IDEAS: The bias in the Dollar would look to remain down especially if US numbers are decent and the Greek debt auction is deemed to be mostly successful.

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DOLLAR: The Dollar Index continues to maintain a bullish tilt on the charts, despite lingering concerns for the pace of the US recovery. However, ongoing concerns toward the Greece situation has provided the Dollar with a bid in the overnight action. While a sloppy or slack US Durable goods report might restrict the upside in the Dollar today and the Dollar might also be undermined as a result of a marathon televised Washington political debacle, the bias looks to remain up in the Greenback. In other words, the economic and political outlook inside the US isn’t overly impressive, but apparently the outlook and condition in the Euro zone is even worse. In fact, overnight the Euro zone saw economic sentiment decline for the first time in 11 months and S&P has warned of a possible downgrade of the Greece debt rating. Some sources are suggesting that a downgrade of the Greek credit rating will cancel out the budget slashing efforts that are already causing violent protests. With a Greek official reportedly lashing out against the Germans and also maligning the EU leadership, it is clear that tensions are running pretty hot. Therefore, the Dollar looks to continue to get the benefit of the doubt on its economy, because of a more powerful flight to quality influence. Critical up trend channel support is seen at 80.36 but a closer in support level is also seen at 80.86.

EURO: As suggested already, the situation in Greece continues to undermine the Euro at the same time that Euro zone economic readings depicted a lack of internal confidence. With the EU overnight, releasing a series of growth forecasts on its members, it is clear that investors aren’t going to rush to invest in the Euro zone for high rates of return. We think the lashing out from a lower level Greek official is an indication that the bailout package being offered from the Euro zone is a paltry offering. Therefore we see a series of lower lows ahead in the Euro, with the next critical chart support level not seen until the 1.3420 level on the weekly Euro chart.

YEN: The Yen continues to benefit from the turmoil in the Euro zone and also because of the confusing situation in the US. Therefore a certain amount of flight to quality uncertainty is expected to flow toward the Yen. In fact, with a “ratings agency” giving the Japanese a left handed compliment, by suggesting that the Japanese situation was not at all like the Greek situation, it would seem like the bulls in the Yen are getting help from the headline spin. Near term upside targeting is seen up at 112.61 and the bull camp looks to remain in control.

SWISS: Once again the Swiss remains vulnerable to spillover pressure from the Euro. While the trade continues to talk about the threat of intervention from the SNB, there doesn’t appear to be a need to intervene as the down trend in the Swiss looks to be entrenched. Down trend channel resistance is seen up at 92.93, with the odds looking really good for the lowest trade in the March Swiss since June of 2009.

POUND: A definitive range down extension in the Pound overnight highlights a deteriorating global recovery view and perhaps even renewed concerns toward the debt situation in the UK. The UK debt situation was temporarily forgotten in the face of generally upbeat economic views but now that the recovery view is tempered somewhat the debt fears have returned. Apparently BOE dialogue continues to add to the selling pressure in the Pound, as the trade sees the need to extend quant easing, as a sign that the UK economy remains in a pickle. One has to go to the weekly charts in the Pound to find the next support level down at 1.5113.

CANADIAN DOLLAR: Like the Pound, the Canadian is being undermined by sagging macro economic views. If the US economy remains slow, Greece remains a threat and the Chinese are still thought to be on the cusp of more tightening, a recovery currency/commodity currency like the Canadian, is probably going to remain out of favor. There should not be a lot of pressure on the Canadian, but the Canadian should work consistently lower on the charts.

TODAY’S MARKET IDEAS: The Dollar and Yen look to continue to win by default.

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DOLLAR: The Dollar has shown definitively bullish and definitively bearish tilts this week. As in the world equity markets, the currency markets are facing a significant amount of uncertainty in the US, with respect to government policy, taxation, spending, clean air and perhaps several other issues that should be nowhere near the front burner. In the end, the pace of the US economy doesn’t seem to support a distinct flow of fresh capital toward the Dollar, but the lack of a definitive alternative has seemingly kept the Dollar well bid this week. In fact, the Dollar bulls seemed to buy into the idea that the US would actually live up to promises to limit spending. Like the US stock market, we have trouble being bullish toward the Dollar off the current track in the US economy. One would also think that seeing the US Federal Reserve remain on hold again today would be negative for the Greenback. Getting away from politics, Obama would seem to need to bring down the level of policy uncertainty for the US Dollar and for most US assets to be held in consistent favor. We get the sense that the Dollar is expensive above 79.00.

EURO: While the March Euro actually managed another new low for the move overnight, the currency did manage to reject that slide. However, the Euro remains just above the downside breakout point and while the German government gave some positive economic views overnight, the 2010 German GDP forecast for a gain of only 1.4% hardly looks to attract an aggressive influx of investment. The one thing the Euro does have going for it, is a lack of political wrangling and to a degree, that has probably served to limit the amount of selling pressure on the currency. We seriously doubt that the March Euro is going to avoid at least a temporary slide below the 1.40 level. The biggest hope of the Euro bulls, has to be that the US is poised to step on its own tail in the State of the Union address tonight.

YEN: As we predicted, the March yen managed a rise back above the 112.00 level and we would not think that the upside action has fully run its course yet. In fact, until one can get bullish toward the US equity market, we suspect that the bias in the Yen will remain up. If the Obama Administration lights more fires than it puts out in the speech tonight, that could see the Yen reach up to the 113.50 level before the end of the week. It is still too soon to add to long term Yen put plays.

SWISS: After a fresh new low for the move was rejected overnight, one might get a technical sense that the Swiss has bottomed. However, for the Swiss to bottom probably requires a distinct improvement in the global macro economic outlook and we are not sure if that is in the cards over the coming 36 hours. The March Swiss might need to fill a gap on the charts, with a temporary slide back down to 94.85.

POUND: A pattern of lower highs on the charts would seem to leave the bear camp with an edge today. So far, predictions calling for an annual rise in UK CPI figures had little impact on the Pound. It does seem as if the Pound was bid up off BOE dialogue, that suggested 4th quarter UK GDP figures might come in stronger than initial expectations. Like a number of other currencies, the Pound bulls would seem to need a turn up in global equities, just to throw off an entrenched downward bias.

CANADIAN DOLLAR: While the Canadian has managed to avoid a fresh new low for the move overnight and the BOC offered up some very valuable advice on Bank Reform overnight, the current market isn’t capable of fully checking the slide in the Canadian. Against a back drop of Chinese tightening fears, confusing US policies and a lack of distinctly upbeat economic readings, that would seem to leave the key Commodity currency, the Canadian out of favor. The best thing that can happen for the Canadian bulls, is to see a misguided ongoing washout in the March Canadian down to 93.00 and then one might be able to re-enter the long side of the equation.

TODAY’S MARKET IDEAS: Expect the Yen to remain well bid until the latest track of US policy initiatives is unleashed on the marketplace.

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DOLLAR: With the March Dollar Index closing below the 78.00 level yesterday and the Greenback tracking lower initially this morning it would appear as if interest in riskier instruments remains in place. We also think that the trade has temporarily lost respect for the US economy and in turn has temporarily lost its expectation that US rates are going to rise anytime soon. Therefore, the path of least resistance is pointing downward in the Dollar and it may continue to point lower until there is a distinctly strong US economic reading, or perhaps some surprise international flight to quality development. It is also likely that the overbought technical position of the Dollar is contributing to the weakness this morning, as the most recent COT report put the “combined” spec and fund Net Long position in US Dollar at new record level of 41,167 contracts. Therefore, the Dollar was clearly overbought technically and perhaps a bit overdone fundamentally around the recent highs and that could clear the way for a temporary slide. However, we suspect that the big down trend pattern in the Dollar has ended and that traders will eventually see a resilient Dollar trade ahead. In fact, in the early going today, the market clearly rejected the 77.39 level in a rather definitive fashion.

EURO: Like the Dollar, the Euro seems to be garnering a large portion of its action from technical balancing influences, instead of classic fundamental issues. Nonetheless, the Euro did see a “combined” spec and fund position that was net short 20,513 contracts as of early last week and therefore the sharp bounce off the 1.4250 level isn’t that surprising. In looking at the flow of euro zone economic data, there doesn’t appear to be a classic fundamental reason to consistently push up the Euro, but given ongoing economic euphoria in the equity markets, it is possible that the Euro will see some risk orientated buying. However, while the German jobless situation seemed to improve in December, we just don’t see the economic condition in the Euro zone as an attraction for capital. At least in the short term, the bulls look to have an edge, with a temporary move back above 1.45 possible, before the prowess of the US economy regains the upper hand later this week.

YEN: With a weaker Dollar seen over the last two trading sessions and the US Fed reiterating the need to leave interest rates down, the carry traders are emboldened again. However, we would see a return to levels above 109.50 as an opportunity to get short the Yen at a higher level, as recovery is ahead and eventually the carry trade will be unwound. With the magnitude of the November through December washout simply massive in size, the first retracement point of the break in the March Yen was all the way up at 111.35, but we doubt that the market will see that much of a sustained recovery ahead. Let the market bounce a little before adding or implementing fresh long term short side plays.

SWISS: In the March Swiss, a normal retracement of the November through December slide would seem to allow for a recovery bounce back to 97.30 this morning without even altering the downtrend pattern. The 50% retracement level for the Swiss is now seen up at 97.94 and a close above that level would get our attention and cause us to doubt our longer term bearish view toward the currency. However, as in other currencies, temporary weakness in the Dollar allows for some short covering in non Dollar currencies.

POUND: The Pound clearly lost its bullish momentum in the prior trading session and with the range down washout action this morning, it is clear that the fear of the UK debt load is once again behind the weakness in the Pound. A close below 1.60 today could project a further slide down to 1.5912 in the coming trading sessions. In short, the inability to hold up in the face of an early Dollar slide really highlights the Pound as one of the weakest currencies.

CANADIAN DOLLAR: While the Canadian remains poised just under its recent highs, we think that the Canadian needs a bit of a perfect macro economic storm just to continue to rise toward the 98.00 level. In other words, the Canadian needs a weaker Dollar, up beat macro economic sentiment and perhaps even noted ongoing gains in equity markets to catch what we would call a further recovery wave of buying. The path of least resistance looks to be pointing upward, but further gains might be difficult to engineer and the risk to longs has risen.

TODAY’S MARKET IDEAS: Temporary technical balancing in the Dollar provides a temporary rally window for the Yen, Euro and Swiss.

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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.

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DOLLAR: The Dollar remains in a partially bullish posture after last week’s impressive range up extension and that is telling in of itself. In other words, the Dollar has managed to hold up despite talk that “risk” trades are back in vogue again and that is in a sense a true change. While it is premature to suggest that money is expecting a greater return inside the Dollar directly ahead, the trade is seeing the signs that the US could be getting in a position to raise rates in the future. With some slack economic readings from the euro zone overnight, one could also suggest that the macro economic differential between the US and the Euro zone has started to shift and that could also be another source of residual buying interest for the Dollar. While the Dollar did see some minor selling pressure off the news of the Dubai bailout overnight, the trade seems to be looking at the Dollar in a slightly different light. Furthermore, with a lack of scheduled US numbers due out today, it could be difficult for the market to throw off the bullish tilt in the Dollar from last week. With the December 8th Commitment of Traders with Options report for US Dollar showing the Non-commercial position to be net long 13,854 contracts, with the Non-reportable position net long 1,339 contracts, that made the “combined” spec and fund position net long 15,193 contracts as of early last week. In short, the Dollar showed only a modest net spec long positioning and that could mean that the Dollar isn’t in danger of becoming technically overbought off minor upcoming gains.

EURO: While the March Euro is showing signs of rejecting the lows forged at the end of last week, we can’t argue with a continuation of the bear track. In addition to slack Euro zone economic readings overnight, it would not seem like favorable global equity market action is providing the Euro with much in the way of lift. In fact, the Euro zone showed a decline in industrial activity and a loss of employment and that could prompt the trade to assume that the Euro zone won’t be poised to raise interest rates anytime soon. In fact, in order to turn the down trend pattern around in the March Euro, might require a rally back above 146.80. However, the December 8th Commitment of Traders with Options report for Euro showed the Non-commercial position to be net long 586 contracts, with the Non-reportable position net long 18,189 contracts, and that made the “combined” spec and fund position net long 18,775 contracts as of early last week. However, despite the slide in the Euro in the wake of the COT report mark off, the Euro probably remains minimally net spec long and vulnerable to more selling.

YEN: The Yen appears to be showing strength in the early action today but considering that the current trade is still significantly below the highs from last week, we aren’t surprised in the attempt to bounce. However, we continue to think that the November highs in the Yen are some form of significant historical high that won’t be replicated easily. In fact, we think last week’s failed rally above 114.00 has created a fairly significant resistance zone that traders should use as an area to implement fresh short side position plays. The 50 day moving average in the March Yen is seen down at 111.74 and that could become an extremely critical pivot point later this week.

SWISS: The Swiss has clearly fallen below the 50 day moving average and seems to be entrenched in a downward bias on the charts. We think that the SNB is facilitating the slide in the Swiss and that a sub 86.00 trade is likely in the coming week. Even more surprising is the fact that the Swiss continued to slide in the face of a less aggressive SNB intervention dialogue at the end of last week. In order to throw off the down trend pattern in the March Swiss, probably requires a close back above 97.45.

POUND: Even in the face of up beat economic dialogue from the UK Prime Minister, the Pound appears to remain in a downward tilt on the charts. With the March Pound sitting comfortably below the 50 day moving average and the markets not exactly enamored with the growth news coming out of the UK economy, it might be difficult for the Pound to avoid a near term return to the 160 level. One might have expected the Pound to bounce, in the wake of the Dubai bailout news overnight and that in turn suggests that the Pound looks to remain mired in a downward bias on the charts.

CANADIAN DOLLAR: The Canadian wasn’t able to attract enough non Dollar buying support to overcome the bullish tilt in the Greenback at the end of last week and that still doesn’t seem to be case into the opening today. With a host of key Canadian commodities remaining weak and the residual interest in the Dollar apparently too much for the Canadian trade again, the path of least resistance in the March Canadian looks to remain down. In fact, an 8 month old up trend channel support line was also violated overnight and the Canadian also fell below the 50 day moving average late last week and therefore the bear camp looks to have a series of technical indicators in its favor into the opening today.

TODAY’S MARKET IDEAS: Expect the Dollar to gain against the Swiss, Canadian and Euro this week.

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DOLLAR: The Dollar Index has managed a quasi upside breakout on the charts overnight and that move appears to have come off renewed flight to quality interest. In fact, with a series of very discouraging international economic readings overnight and the equity markets not being lifted by reports that are up beat, it would seem like many markets are embracing concerns of a failed or slower than expected US recovery. Some traders might be buying the Dollar off ideas that the US Fed is poised to change its rate policy on Wednesday but that view would seem to be premature. However, in the current environment the path of least resistance in the Dollar looks to be pointing higher and flight to quality buying and or interest rate differential buying look to be temporarily back in vogue. Keep in mind, we are not overly impressed with the Dollar prospects, but a combination of technical short covering and temporary anxiety over the direction of the global economy could give the Dollar a temporary lift. Near term upside targeting in the December Dollar Index is seen up at 77.25, with solid support moving up to 76.60.

EURO: With a noted range down extension in the Euro overnight, the December contract has violated a series of key chart support levels. With a very discouraging set of economic predictions floated from the EU overnight, and a series of discouraging economic readings seen from outside of the Euro zone, the fear of a failed recovery or perhaps just a much slower than expected global recovery, seems to have settled into the currency markets. With the Euro recently the leadership currency and the Euro really benefiting at the expense of Dollar weakness for several months, it would seem like the tables have been turned and that could set the December Euro up for a quick return to the sub 145 level. While the December Euro might see some temporary support at 145.87, we see the trend this week in the Euro to be down.

YEN: The yen is at least initially holding together this morning and given the potentially overbought fundamental condition in the Euro, Swiss, and Pound, we have to think that the Yen and the Dollar are set to win by default. It is possible that the Yen is capable of garnering some support from news of strong bank lending activity in China. Therefore, critical support in the December yen is seen at 110.84 in the short term and a run at the 112.00 level is possible, if the Yen becomes a port in a storm of fears that the global recovery is indeed in question again.

SWISS: Some traders suggest that central banks only intervene when the market is going in their direction and given the downside washout in the Swiss overnight, perhaps the SNB should now step in and facilitate the slide. However, the short term impetus in the Swiss is seemingly coming from a “failed” recovery mentality and given the action in global equity markets recently and the expectation of slack US numbers at the end of the week, we suspect that the December Swiss is poised for a sub 96.00 trade directly ahead.

POUND: So far, the Pound hasn’t seen much in the way of downside action off what appears to be a let down in macro economic sentiment. With the UK forcing several large banks to downsize, it would seem like the repair to the financial sector is going to be made even more difficult. With world equity markets also showing signs of forging a moderate correction, the bank breakup notice and the BOE expected to expand their quantitative easing efforts again there would seem to be a number of reasons to push the December Pound into a downside breakout below critical chart support of 162.45.

CANADIAN DOLLAR: So far, the Canadian hasn’t forged a downside breakout on the charts and that is somewhat surprising considering the deteriorating macro economic view from the overnight newswires. With the Dollar forging an upside breakout on the charts and a host of key Canadian commodities under distinct pressure, we see the prospect of a slide in the December Canadian down to the late September consolidation lows around 91.05.

TODAY’S MARKET IDEAS: The new leadership is the Dollar and Yen, with the Euro the most vulnerable from a technical and fundamental perspective.

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DOLLAR: The Dollar action surprised and shocked some of the trade in the prior trading session, as the bounce wasn’t definitively tied to a credible theme. The bulls will suggest that the prospect of the US exiting the aggressive stimulus posture was behind the bounce, especially since the US Treasury markets were bordering on two month lows on their charts yesterday. While the markets might like to see the Fed clarify their position on interest rates in a statement, the markets could get a sense at mid session today if the Fed is starting its unwinding process as Treasury prices are poised at a breakout point and the large auction today is a large enough event that the Fed probably needs to artificially support the auction for it to go off favorably today. In other words, the Fed will probably have to support the auction today or rate hike expectations will be lifted further. We think it is still premature to think that the Fed is going to let the economy fend for itself and that they will attempt to support the auction today. A 7 month old down trend channel resistance line is seen at 76.25 this morning and that could be seen as an extremely critical pivot point. We think that the dollar might actually rise above that level in the wake of the early Case-Shiller home price survey reading this morning but that the Dollar will fail in the face of the Treasury auction results just ahead of 12:00 central time.

EURO: The Euro was clearly undermined as a result of the miss timed assumption of rising US interest rates. However, the Euro bulls will probably wait until after the auction results today before gaining enough confidence to re-enter the long side of the Euro. On the other hand, holding the Euro back from some near term gains is the fact that the Euro zone money supply figures (and private lending) slowed in the most recent reporting period but that news was partially offset by a rise in French Consumer Confidence readings. In the short term, the direction of the Euro isn’t going to be determined by Euro zone growth expectations, as the direction of the Euro looks to be determined by the views of the Dollar. We don’t think that the Euro up trend has run its course yet, as the US still wants and needs a lower US Dollar. While up trend channel support isn’t seen until the 147.35 level this morning and that trend support rises to 147.50 on Wednesday, we suspect that the market will generally hold above 148.40 this morning, before catching a bid just ahead of 12:00 central time window.

YEN: The Yen did see another fresh new low for the move today but it has managed to reject that initial probe. We suspect that the Yen is now poised for a recovery bounce, especially if the Dollar falls in the aftermath of the US Treasury auction at mid session. However, the overall trend in the Yen looks to remain down, with down trend channel resistance in the December Yen seen up at 108.60 today. Sell a mid day rally today in the December Yen.

SWISS: Up trend channel support in the December Swiss is seen today at 97.93 and we see no reason for the up trend pattern in the Swiss to come to an end. However, favorable US home price readings early in the trading session might put the Swiss under some minor additional pressure before the US Fed steps up to support the Treasuries at mid session. Seeing the US Fed indicate that rates are going to be held down longer in the face of a large auction today, should rekindle buying interest in the Swiss later in the trading session.

POUND: The Pound seems to be poised to mount a bit of a recovery bounce, but it would not seem like the bounce is the result of a solid fundamental development. However, it is possible that the Pound is attempting to pre-position ahead of a resumption of Dollar selling, later in the Tuesday US action. Some might suggest that the Pound is rising off talk of favorable BOE recovery views, while others are suggesting that a rise in US home prices might reverse some of the negative sentiment lobbed at the US home builders yesterday. We don’t agree with the upward bias in the Pound, but there might be little resistance until the 165.00 level in the December Pound today.

CANADIAN DOLLAR: The Canadian Dollar remains under pressure in the wake of a noted Dollar bounce that in turn sparked a broad based liquidation in key Canadian commodities. However, we think that the US Fed will have to step up and support US Treasuries, which in turn should tamp down the idea that US interest rates are poised to rise. Therefore, aggressive traders should buy the Canadian today looking for a recovery bounce ahead.

TODAY’S MARKET IDEAS: It is too early for the Dollar to recover, unless the Fed lacks the capacity to control US interest rate expectations.

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DOLLAR: The Dollar seems to have carved out some support just under the overnight lows, but in general the charts in the Dollar still seem to give off a bearish tilt. We also think that a lack of definitive favor in other currencies is providing the Dollar with some artificial support. However, unless the general expectations for a slow and gradual global recovery are discarded, we doubt that the Dollar is going to see anything other than temporary technical short covering gains. However, with the Dollar showing some minor positive action in the wake of a better than expected German Ifo reading overnight one gets the sense that the Dollar is set to make a weak recovery bounce, perhaps in the event that US equity prices weaken later today. In the end, rallies in the Dollar appear to opportunities to get short for an eventual continuation of the downtrend pattern. Unless the US scheduled data points today are surprisingly weak, we doubt that the September Dollar Index will be able to rise above 78.65 today.

EURO: While the Euro is showing some initial positive action this morning, the bull camp has to be partially discouraged by the failure to get a big lift from better than expected German Ifo readings. In fact, the August Ifo reading came in at 90.5 versus an 88.8 reading in the prior month and that should have resulted in more favor flowing toward the Euro. Up trend channel support in the September Euro this morning is seen at 142.75, but we doubt that as expected US data flows later this morning, will serve to yield a distinct upside pulse in the Euro today. In fact, we get the sense that the Euro is showing signs of losing a portion of its recent bullish momentum. Even in the face of weakness, it would appear that the Euro has a secondary close-in support zone down at 142.50 on the charts.

YEN: The yen has clearly lost a good portion of the bullish bias that was in place into the August 21st highs. As suggested in other currency coverage today, there seems to be a lack of leadership in the currency markets right now and that is probably the result of a lack of fresh fundamental psychology. Pushed into the market, we would look to get short the Yen today on a rally to resistance of 106.55, but it is possible that the September Yen will find fairly solid support on the charts down at 105.95.

SWISS: The Swiss also seems to have lost a portion of its bullish bias that was in control of the market into the August 21st highs. The bull camp can suggest that the market retains a fairly solid consolidation support zone just above the 94.00 level on the charts and therefore we would suggest that short term traders look to be buyers of an early setback in the Swiss.

POUND: Clearly the weakness in the Pound this morning presents the most definitive trend in the currency markets. In fact, despite decent economic news from the IFo, mostly favorable equity market action over the last week and ongoing expectations of a global recovery, the Pound has acted like anything but a recovery currency. In other words, the market sees the Pound to be over valued and anything short of a much stronger than expected recovery, looks to see the Pound weaken. In the event that economic doubt on the recovery escalates, we suspect that the rate of slide in the Pound will expand. Near term downside targeting in the September Pound is seen at 162.50 but we can’t rule out a return to the 160 level into the next US unemployment report.

CANADIAN DOLLAR: Like the Pound, the Canadian is vulnerable to even more declines directly ahead. In fact, without very sterling economic readings and sharply higher global equity prices today, we suspect that the September Canadian is poised for a slide back down to the 90 level.

TODAY’S MARKET IDEAS: A lack of definitive leadership in the currency markets for the coming trading sessions.

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DOLLAR: Not surprisingly the Dollar is catching a distinct flight to quality bid this morning. In addition to ideas that global equity prices were ahead of reality, the market seems to have seen a downshift in economic readings, with the US retail sales report and Michigan sentiment readings late last week being joined by a slack UK private housing report and lackluster attitudes toward the Chinese recovery in the overnight headlines. Apparently the currency markets are uninterested in suggestions from Japan that they are poised to climb out of the recession in the next quarter. In fact, with the UK and now the US, seemingly adding slightly to their quantitative easing efforts, the markets are suspecting that the slow down threat remains in place. With a large US financial institution failing over the weekend and the failure apparently the biggest of the year, that clearly rekindles financial market flight to quality interest in the Dollar. With the August 11th Commitment of Traders with Options report for US Dollar showing the Non-commercial position to be net short 10,110 contracts, with the Non-reportable position net short 1,693 contracts, that made the “combined” spec and fund position net short 11,803 contracts as of early last week. Therefore the September Dollar looks to be poised to rise to the late July highs of 79.81, but we doubt that the Dollar is going to completely throw off the downward bias that has been in place since early March.

EURO: The Euro is clearly under a liquidation watch, as the markets have once again rekindled concerns for the recovery. We would suggest that weakness in equities at the end of last week and into the opening this morning, were the result of ideas that the equity markets were ahead of reality and to see equity prices fall consistently throughout this week, might require fears of a failed recovery effort. However, in the near term slumping sentiment looks to apply pressure to the Euro and that could easily send the September Euro down to the first consolidation support zone of 140.00 on the charts. With the August 11th Commitment of Traders with Options report for Euro showing the Non-commercial position to be net long 17,551 contracts, with the Non-reportable position net long 18,905 contracts, that made the “combined” spec and fund position net long 36,456 contracts as of early last week. Therefore from a technical basis, the Euro would seem to retain at least a couple more days of long liquidations selling pressure.

YEN: The yen clearly seems to be a currency in vogue, with strength being seen in the Yen recently in the face of strength in equities and the currency also being bid higher in the face of slumping equities. Clearly the Yen is garnering some flight to quality type buying and that in combination with mostly upbeat macro economic views toward the Japanese economy looks to give the Yen an additional flight to quality benefit. Near term upside targeting in the Yen is seen at 106.41 and perhaps even higher if the anxiety being thrown off by the equity markets intensifies.

SWISS: A big range down extension in the Swiss clearly suggests that the Swiss, Euro, Pound and Canadian are all set to lose in the face of an economic letdown in world equity markets. While the Swiss looks to follow the lead of the Dollar and the Euro in the coming trading sessions, we would be surprised if the September Swiss didn’t fall quickly back to the 92.00 level in the coming trading sessions.

POUND: In addition to deteriorating macro economic views, the Pound also seems to be getting pressure from news of a privately generated housing survey. With the Pound into the August highs, technically and fundamentally overbought, that seems to set the stage for a slide to at least 162.63. In order to see a full washout in the September Pound, down to the 160.00 level, probably requires extensive liquidation carnage in global equity markets!

CANADIAN DOLLAR: Since the Canadian has already seen an aggressive liquidation washout to the even number 90.00 level this morning, a good measure of the macro economic disappointment is probably already factored into prices. However, it would appear as if the negative outlook toward the global recovery, is still destined to play out over the coming trading sessions and that could put the September Canadian down to the 89.31 level in the coming two trading sessions.

TODAY’S MARKET IDEAS: Expect the Yen and Dollar to extend overnight gains for at least the first two trading sessions of the new week.