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 has been able to put the brakes on the recent slide, and has moved away from the recent lows. Sentiment for the Dollar has shown little improvement overall, so this recovery may be due more to a profit-taking move out of European currencies than to a change in trend. US economic numbers have weighted on the Dollar recently, generally being weak but not bad enough to provide a risk shock to the US equity markets. As long as most of the market headlines are being generated here instead of overseas, the Dollar is likely to stay on the defensive, with the chances of an extended recovery limited at best. Even so, the Dollar may be able to rally back to the 81.00 resistance level this morning, as long as there are no surprises from this morning’s US ISM Non manufacturing data.

EURO: The September Euro has lost upward momentum today, and drifted back below the 1.32 level. Today’s Euro zone economic numbers may not have been that bad, but they were more than enough to slow down this current rally. With most of the market’s attention on the US lately, the September Euro may need another risk flare-up or some seriously negative economic news in order to derail the longer-term up move pattern. While a descent towards the 1.3170 level may occur during today’s session, any further move below that area may be difficult without fresh concerning news out of Europe.

YEN: The September Yen continues to be the main beneficiary of the Dollar’s protracted weakness, and is now within striking distance of new 15-year highs. While safe-haven support has underpinned this move higher, there seems to be few fundamental reasons from the Japanese economy to justify this sort of currency rally. With a large portion of their economy tied to exports, it should be no surprise that there is concern from both the Japanese government and the Bank of Japan over the strength of this move. Today’s up move will likely hold during the rest of the session, but the chance for a sharp downside reversal are increasing by the day.

SWISS: Although fairly close to a new high for the move, the September Swiss appears to have lost upside momentum this morning and has begun to drift lower. Look for the September Swiss to continue moving lower this morning, but the Swiss should find support near the 95.75 level as this uptrend should remain intact.

POUND: The September Pound has remained near the top end of the recent rally, but has come under mild pressure from a private survey of UK service industries. Look for the September Pound to find strong support near the 1.59 area as another new high for this rally may occur later on today.

CANADIAN DOLLAR: The Sept Canadian has been able to hold above the 97.00 level, but has been sluggish in extending this move higher. Unless there is another risk flare-up, however, the Sept Canadian should find support near the 97.30 area, as this rally appears to have more strength than other recent up moves over the past few months.

TODAY’S MARKET IDEAS: While the Dollar has held its ground this morning, sentiment has shown little change so any potential for extensive gains may be limited at best. Look for the September Pound to post a new 6-month high later on during today’s session.

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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: Although it has had a bumpy night, the Dollar has returned toward unchanged levels as we approach the opening. Most of the volatility has occurred during European hours, as a lack of clarity towards the direction of Euro Zone economic policy has left the market looking for any sense of direction. The comments by Eurogroup Chairman Juncker that there is no need to take immediate action to stem the Euro’s rapid fall in value are in sharp contrast to recent German action, particularly with the unilateral step of banning short selling of Euro Bonds and related credit default swaps. While the rapid Dollar rise over the past few days left prices vulnerable to the sort of pullback that we saw yesterday, there appears to be plenty of risk aversion still left in world markets to prevent a full-scale change in bullish Dollar sentiment. Unless there are some big surprises in today’s US economic numbers, look for the Dollar to hold onto its safe-haven status and find very solid support near the 86.40 level.

EURO: With this week’s German show of strength being undercut by recent comments by the Eurogroup Chairman and the French Economic Minister, the chances for the June Euro building up enough support for a return to the 1.25 level by the end of the week may have eroded as well. Even if the rest of the EU comes over to the German style of hard-line Euro support, the market has already sensed enough uncertainty with the course of current action, to likely mitigate any benefits found with a unified front. Baring concerted intervention to support the Euro, which becomes more of a possibility if we see new lows during the near future, expect the June Euro to remain on the defensive during the course of today’s trading, with a further move back below the 1.23 level a very likely result.

YEN: While the Japanese GDP number overnight was a mildly supportive factor, the June Yen may be finding more benefit from the repatriation of Japanese funds out of riskier areas such as Europe, Canada, and Australia. Even so, the June Yen’s moves above the 110.00 over the past few days may be a bit ambitious, given the ongoing deflationary Japanese economy and a government calling out for a much weaker Yen valuation. As long as the Euro Zone situation remains volatile, the June Yen should continue to find safe-haven support but will likely find resistance near the 110.00 level over the next few days.

SWISS: The June Swiss suffered a huge setback against the Euro as a failure to find a new all-time high against that currency caused a huge reversal in that spread. Now that the Euro is on the defensive this morning, the June Swiss is likely to outperform the other European currencies but it will likely need a major change in Dollar sentiment to have prices return towards last week’s levels. The June Swiss should remain well supported today, but may find resistance up near the 87.60 level.

POUND: A weak UK Retail Sales number has added to the pressure on the June Pound this morning, as the flows out of riskier currencies have now seen a move against the Pound. Until the new UK government puts out their fiscal plans, the market will likely find doubt over their eventual success in reviving the British economy. Look for the June Pound to remain on the defensive today, with the market finding resistance near the 1.4450 level.

CANADIAN DOLLAR: June Canada continues to be pressured by events in Europe, as the market’s aversion to riskier currencies has helped to send prices down towards their range during the May 6th meltdown. Until Euro Zone problems calm down, it is unlikely that the June Canada will be able to hold onto any support level for an extended period of time. The June Canadian may find support near the 94.50 level this morning, but will be unlikely to make a move above the 96.00 level, unless there is a drastic change in broad market sentiment towards the “so-called” riskier currencies. Even a slight tempering of the Euro situation could lead to a massive recovery in the Canadian.

TODAY’S MARKET IDEAS: At this point, it appears that the Dollar is gaining the upper hand again as risk aversion continues to influence the markets. Look for the June Euro and June Pound to remain under pressure, while the June Yen should hold limited support during today’s trading.

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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 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: With the US Dollar Index managing a fresh new low for the move overnight, it is clear that the flight to quality concerns in the marketplace are currently minimal. However, we suspect that the Dollar might be poised to see a bit of a lift in the wake of the US Housing Permits release, as that reading is expected to be soft and that reading is sometimes considered a leading indicator for the US housing sector. We are not sure if the US Dollar is poised to react to the shifting political scene in the US and we are also not sure if the Dollar is going to be impacted by talk that China might be taking measures to lower their US debt holdings. However, seeing even a slight tempering of Chinese interest for US Treasuries, in the face of historic supply flow of US debt, can’t be a good thing for the US Dollar in the long run! At least in the near term, we see the prospect of further minor weakness in the Dollar, off a slight improvement in macro economic sentiment, but we really doubt that the overall pattern of strength seen in the US Dollar since the late November low is set to come to an end, especially since the Greece situation is apparently far from being resolved.

EURO: While the Euro technically showed a quasi upside breakout off a steep down trend channel resistance line overnight, the currency quickly failed at that level. With some news stories surfacing on various financial moves inside Spain overnight, we suspect that the fear of additional debt crisis developments in the Euro zone will continue to undermine overall Euro sentiment. We continue to think that rallies back to 137.50 should be considered a selling opportunity in the March Euro, especially if the press manages to dredge up any additional problems with EU membership maneuvers. It is even possible that slack US economic numbers will also manage to weigh on the Euro, as the Euro, Swiss and Pound can hardly afford to see any slower than expected recovery news from the US economy.

YEN: The March Yen continues to derive some measure of support from the 50 day moving average, but it would still seem like the technical bias in the Yen is favoring the downside. We also have to wonder if Toyota troubles are indirectly weighing on the Yen, as the Press seems to be pushing for the Toyota CEO to testify to the US Congress. On the other hand, with a shift in Chinese ownership of US debt, the Japanese have apparently become the largest holder of US government debt and therefore Congress had better tread lightly in their attempt to harangue a foreign corporation. In the near term, we don’t see a definitive downward thrust in the Yen, but we would expect to see a sub 110 Yen trade over the coming trading sessions.

SWISS: With a pattern of lower highs on the charts and ongoing negative internal macro economic sentiment, the bear camp looks to retain an edge in the Swiss. In fact, some press outlets suggested that the SNB was possibly acting to restrain the Swiss from further gains and that would in turn seem to suggest that the 94.00 level in the March Swiss has become some form of fundamental and technical resistance zone. While we don’t see the prospect of an aggressive thrust down in the Swiss, a series of downside moves still looks to be in the cards.

POUND: As we suggested earlier this week, the Pound has managed to benefit from the recent improvement in sentiment. However, without stepwise further improvement in views toward the US economy, we doubt that the Pound will be able to garner that much upward momentum. In fact, with some forces calling for Greece to respond to currency swap charges by the end of the week it is still possible that the Euro zone debt issue will serve to trip up recovery currencies like the Pound. We can’t argue against more minor gains in the Pound this morning but we are just not inclined to call for a sustained upward action in the Pound.

CANADIAN DOLLAR: While the Canadian hasn’t managed to forge a fresh new high for the move today, the bull camp might retain a slight edge. However, a slack UK employment reading, residual Greece currency swap fears and fears that China might be scaling back US debt purchases, are all forces that serve to temper buying interest in the Canadian Dollar. With a more mixed tone in physical commodity markets this morning and only a minor higher opening indication in US equities, that leaves seems to leave the Canadian with a very thin bullish edge. It would also seem like the Canadian is in need of a slight technical balancing after a rather stellar two week rally.

TODAY’S MARKET IDEAS: The Dollar generally remains the leadership currency as Euro zone issues are not being restricted to the back burner.

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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: The Dollar index managed a definitive downside extension in the early action today and that would seem to be the result of ongoing flight to quality liquidation. With the June Dollar Index presented with some technical support at the 82.00 level and the US Housing Starts and Permits information a very critical release today, one should expect a major decision in the market this morning. Adding into the downside bias in the Dollar this morning is an optimistic view toward the German economy from the German ZEW readings. However, without gains in excess of 3% in both US Housing Starts and Permits this morning, the June Dollar index might find it difficult to punch through the critical support zone down at 82.00. In the end, we suspect that the action in the equity markets will be an extremely critical influence on the Dollar and for the Dollar to move to a new lower trading range ahead will probably require an extension of gains in stock prices.

EURO: Surprisingly Euro action this morning is very up beat, as the Dollar decline and favorable German ZEW reading have combined to pump up the Euro. In fact, the German ZEW suggested that the worst of the contraction was past and that expectations managed to rise sharply in the month of May and that really serves to bail out the Euro bulls from the recent concern of a return to sustained global slowing. Critical resistance and an upside breakout point on the charts is seen at 136.68 basis the June Euro today. Like the US stock market, the Euro bull’s probably need to see something positive from the US Housing starts and Permits data to directly extend on the upside.

YEN: It goes without saying that the flight to quality long liquidation pressure is expected to extend in the action today, as US corporate earnings news has added to the bullish global macro economic sentiment that was put back in play in the prior trading session. With the residual baggage of the swine flu situation in Japan and the bad technical action on the Yen charts, it would seem like the June Yen is poised for a slide down to the 103.12 level.

SWISS: Like the Euro, the Swiss is expected to be lifted by broad based macro economic optimism. However, upside momentum in the Swiss looks to be somewhat muted, as the market isn’t completely convinced that the recovery view is going to be entrenched. In order to give off consistently bullish technical signals, the June Swiss needs to respect up trend channel support on the charts at 88.94 today and at 89.13 on Wednesday.

POUND: With the latest flow of positive macro economic views, the June Pound appears to be poised to rise sharply. We have been labeling the Pound as a recovery currency for several weeks and that name will probably resonate with the sharp upward action today. In fact, the June Pound looks to be on track to regain the 200 day moving average up at 156.22 in the coming 24 hours. It is even possible that UK inflation readings overnight are actually adding into the bullish momentum in the Pound.

CANADIAN DOLLAR: The June Canadian clearly rejected a recent retest of the 200 day moving average and would now appear to be poised to reach the highest level since early October at some point later this week. As in the Pound, we have been calling the Canadian a recovery currency, for a number of weeks and given the potential extension of the upside in the equity markets, we would not be surprised to see the 87.50 level in the June Canadian become a solid support in the coming week’s action.

TODAY’S MARKET IDEAS: More flight to quality liquidation is expected in the Dollar and the Yen today, with the Dollar/Yen weakness giving the Pound and the Canadian a huge lift.