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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: Not surprisingly the Dollar is lower this morning as concerns toward EU debt are apparently being temporarily pushed to a back burner position. However, the debt concerns haven’t dissipated they are just a little stale or perhaps temporarily over exposed. It does seem as if the recovery bounce in equities is serving to undermine the Dollar this morning, as higher equity price action gives off the impression of a trade that is going to be interested in slightly riskier investments. It is possible that favorable Coke earnings, a favorable US Treasury auction result and hope for the Senate Jobs bills could add to the downside tilt in the Dollar throughout the trade today. However, we doubt that traders will want to remain negative toward the Dollar beyond the US trading session today. Apparently the markets are currently of a mind that recent Greek maneuvers are capable of staving off more near term concerns and that also is prompting some long liquidation of the Dollar. We see the 80.00 level as a critical support zone, with longer term up trend channel support seen down at 79.46, but that up trend channel support line climbs up to 79.62 on Wednesday.

EURO: While the Euro is seeing some technical short covering buying in the early trade today, the scheduled number flow from the Euro zone wasn’t exactly overly beneficial to the bull case. In fact, a German CPI reading overnight actually declined by 0.6% and that would seem to point to deflation rather than inflation in the Euro zone. Therefore suggestions from Trichet that the EU needed to keep inflation expectations anchored, hardly serves to foment inflationary views toward the Euro. However, the Euro was certainly aggressively oversold into last week’s lows and a slight recovery effort in the equity markets today could allow for a temporary rise back above the 1.3750 level in the March Euro. In the end, we just don’t see the catalyst for an end to the downtrend pattern in the Euro.

YEN: News of a further tempering of the Greek situation and higher equity market action overnight has undermined the Yen from a flight to quality perspective. Up trend channel support is seen all the way down at 110.22 today, with that support level rising to 110.38 on Wednesday. In an indirect way, the Toyota problems could be a slight undermine to the Yen, but the biggest blow to the yen might come from a temporary unsustainable reaction to the upcoming US jobs bill.
Aggressive traders should be willing to sell the March Yen on any rally today back above the 112.00 level.

SWISS: Like the Euro, the Swiss was technically overdone around the lows last week and now the currency is due a temporary corrective bounce. At least for the near term, the Greece situation is apparently going to shift to a back burner status and that should also allow the Swiss to recover. Initial resistance is seen up at 94.00 but we can’t rule out a temporary rally back above that level in the coming 8 hours of trade. In other words, US corporate earnings, US auction results and the promise of another US jobs bill seems to have taken the Greece story out of the headlines.

POUND: Despite seeing some recovery action in other non dollar currencies this morning, the Pound is not showing much in the way of a bounce mentality. In fact, one might have expected the Pound to benefit from slightly higher equity market action overnight but apparently the Pound isn’t easily cheered. A widening of the UK trade deficit overnight seems to have undermined the Pound, as the trade took those readings as confirmation that the recovery progress in the UK is still very questionable. In short, the trend in the Pound looks to remain down with only a brief pause above the 1.55 level today.

CANADIAN DOLLAR: The Canadian is getting some temporary support from what appears to be a slight improvement in global macro economic sentiment. However, we just don’t see the fundamental news to suggest that equities, commodities and the Canadian are poised for sustainable upside action ahead. Therefore, aggressive and short term traders should consider getting short the March Canadian on a minor bounce today back to the 93.83 level.

TODAY’S MARKET IDEAS: Minor Dollar weakness early today, not an end to the recent uptrend pattern.

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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 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 has already forged a fresh downside breakout on the charts this morning and that leaves the down trend pattern intact despite signs that the US economy might be gaining some footing. Apparently the currency trade continues to doubt the pace of the US economic recovery and it also doubts that US interest rates are destined to rise anytime soon. It goes without saying that the world sees the push for US health care reform, as an ongoing burden for the deficit. In short, the market bias remains down toward the Dollar and even a measure of economic optimism doesn’t seem to temper the negative track in the Greenback. Not surprisingly, the Dollar showed almost no life in the wake of statements from Geithner overnight that the US wants a strong Dollar. The market also didn’t seem to buy into the Treasury Secretary comments that the US will eventually get its deficit under control. In short, the bear camp doesn’t seem to have any fear of a counter trend move. Near term downside targeting in the December Dollar is seen down at 74.15.

EURO: So far, the Euro hasn’t taken out the October highs, but the Euro has managed to rise above the 150 level, which in recent weeks, was pegged as an extreme exchange rate level by certain ECB officials. Given strong gains in global equity markets again overnight and generally positive economic data flowing from China overnight, that should leave the recovery currencies like the Euro with a definitive edge against the US Dollar. Near term support in the December Euro now moves up to 150.24 and there might be little in the way of significant resistance until the 150.62 level.

YEN: While the Yen managed an impressive range up extension overnight, that move was clearly rejected in a rather aggressive manner. The bull camp has to be disappointed that beneficial Chinese economic data failed to sustain a strong Yen, as that dampens the idea that the Japanese economy is going to draft off the Chinese economy. The yen also continues to show signs of weakness in the face of market environments, that show an increase in risk appetites and therefore we see the overnight highs in the Yen as really significant near term resistance. In fact, we see closer-in resistance in the December Yen over the coming 24 hours to be 111.36.

SWISS: The Swiss is seemingly poised to return to and above the old highs. Apparently the up beat global economic outlook has caused the Swiss trade to toss aside the threat of central bank intervention. After some initial resistance up at 99.71, the December Swiss is probably set to move to an even higher trading range in the coming trading sessions and that should in turn make the old highs critical support.

POUND: The BOE comments overnight seem to have taken the Pound out of the recovery currency mode this morning. In other words, the BOE suggested that their easing efforts are working, but that inflation looks to remain under control in the near term. In a real rally killer, the BOE also suggested that the chance of an absolute disaster had diminished and that clearly prompted traders to stand aside from the Pound to other less risky currencies. In the end, seeing the BOE remain in an excess easing posture, seemed to prompt traders to bank profits on a currency that has had a fairly aggressive run up off the November lows.

CANADIAN DOLLAR: A definitive range up extension in the Canadian Dollar overnight would seem to project the December Canadian back above the 96.00 level in the coming trading sessions. We suspect that ongoing defined down trend pressure in the Dollar and very up beat macro economic views toward the Chinese economy, plays right into the hands of the Canadian Dollar bulls. In fact, we can’t argue against a December Canadian trade of 96.93 in the coming week.

TODAY’S MARKET IDEAS: More down in the US Dollar ahead, with the Canadian, Euro and Swiss the primary benefactors of the currency market trends.

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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: In certain measures the Dollar managed a fresh new low in the overnight action, even though the December Dollar futures seems to have held above the prior session’s low in the early going today. Apparently the Dollar can’t even muster support in the face of calls for higher rates, nor can the Dollar manage to gain in the face of slack US NAHB housing numbers. In other words, the Dollar isn’t getting anything but a negative reaction to the interest rate and economic differential arguments. However, there were some rumblings in the overnight headlines as the Euro approached the psychological 150 level and the Swiss looks to approach parity with the Dollar. While French officials expressed some concern about a 150 Euro exchange rate that dialogue didn’t seem to have any lifting influence on the Dollar overnight. In fact, if the markets begin to sense the prospect of intervention from either the ECB or the SNB we suspect that will result in action that attempts to ferret out the intervention and in this case that would mean a serious spike down move in the Dollar. Therefore, we see no reason to call for an end to the downtrend in the Dollar, with even more news lows likely in the coming trading sessions.

EURO: The Euro managed another distinct thrust into new high ground overnight but apparently the 150 level has become a fundamental and technical resistance zone. In addition to the December Euro rising to and promptly falling back from the 150 level, it seems that a French advisor to the French President has suggested that a 150 Euro would be a “disaster” for portions of the French economy. Up trend channel resistance in the December Euro is now seen at 149.92 and that resistance rises to 150 on Wednesday. While we think the trade is set to remain up, traders should watch the Euro’s reaction to the US Housing Starts and permits data this morning, as a weakening of the Euro, in the wake of those US figures might portend a temporary technical setback ahead.

YEN: With the Euro seemingly running into psychological resistance this morning, the Dollar weak and even the Canadian showing some corrective action, it is possible that the yen is poised to take a temporary leadership role. Given the magnitude of the early October washout in the Yen and the expectation of something positive from the Chinese economic reading front on Thursday, we have to think that the Yen is poised for more gains. A normal retracement of the early October slide in the Yen, would seem to project a rise back to 111.11 and perhaps even the 50% retracement level up at 111.60.

SWISS: The Swiss has managed another upside breakout in the wake of the latest Dollar failure and it would appear that the Swiss is headed toward parity. We suspect that an exchange rate above parity will spark intervention talk but until that time, the bull camp in the Swiss looks to maintain control over the currency. Near term up trend support in the December Swiss comes in at 98.80, with uptrend channel support a bit further off the market down at 97.96.

POUND: Apparently the bull camp was able to retain control of the Pound, as the Pound has managed a fresh new high for the move in the overnight action. Perhaps the Pound was lifted by favorable mortgage lending activity in September, or perhaps the Pound is just benefiting by default from the constant weakness in the US Dollar. While the path of least resistance in the Pound seems to be pointing up, we suspect that longs in the Pound have more relative risk than the longs in the Euro, Swiss and Yen.

CANADIAN DOLLAR: The Canadian Dollar appears to have become overvalued into last week’s highs. In fact, the Canadian was seeing what appeared to be a perfect storm of macro economic and interest rate differential support and with a flurry of Canadian numbers due out today, it is possible that the Canadian exchange rate may find it difficult to stand up to reality. In other words, the Canadian numbers today might have to be stellar, just to support the December Canadian Dollar above the 96.93 level.

TODAY’S MARKET IDEAS: No sign of a bottom yet in the Dollar, primary benefactors of the ongoing Dollar weakness are the Euro, Swiss and Yen.

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DOLLAR: It is not surprising to see the Dollar carving out fresh lows on the charts again this morning, as a number of international equity markets forged even more gains in the overnight action. Apparently currency traders and global equity traders simply discounted weak UK retail sales readings for August overnight, perhaps because the general consensus is entrenched in a global recovery view. We suspect that US data this morning will simply contribute to the downward track in the Dollar, with even more equity market gains in the US adding to the downside momentum in the Greenback. While other markets didn’t seem to fret over the prospect of a rising US budget deficit, off forward movement on US Health Care Reform, we suspect that the currency markets are set to assume that a move to expand US health care coverage to tens of millions of uninsured US workers, will ultimately balloon the US deficit. In short, the Dollar looks to see pressure off the macro economic outlook and also because of the prospect of even larger US budget deficits ahead. In order to reverse the bias in the Dollar, probably requires a major slide in the US equity markets.

EURO: The Euro remains well bid despite news overnight of a significant widening of its trade balance. As suggested early in the week, the upward bias in the Euro is not coming from the ebb and flow of economic performance in the Euro zone, the bullish bias in the Euro is coming from the firming prospects of a global recovery. It does seem as if the slack UK retail sales readings tripped up the euro temporarily this morning, but favorable US numbers later this morning should probably rekindle the upside bias in the Euro. Near term up trend channel resistance in the December Euro is seen at 147.90 today.

YEN: The Yen has generally respected a pattern of higher lows on the charts this week and that trend support is seen at 109.68 today, with a rise to the 109.93 level possible on Friday. Generally up beat views toward the Chinese economy and generally up beat expectations for the US economy today should leave the Yen in an upward motion on the charts. In the face of more US equity market gains and even better US numbers it is possible that the December Yen could touch 111.30 before the close this week.

SWISS: The trend in the Swiss looks really impressive but some players have begun to fret again over the prospect of intervention from the SNB, as they feel that a Swiss above 97.00 could hurt Swiss export activity. However, it is possible that the prospects of inflation are capable of offsetting the speculative selling interest in the Swiss off the threat of intervention. Critical up trend channel support in the December Swiss is seen at 96.68 today.

POUND: While the Pound has initially managed to discount the somewhat disappointing UK retail sales readings overnight, it seems that the Pound is still set to mostly draft off the persistent weakness in the US Dollar. Therefore, the Pound might be able to rise even further today, in the wake of the scheduled US data flows. Near term upside targeting in the December Pound today is 166.61.

CANADIAN DOLLAR: With another new high for the move overnight, the Canadian looks set to extend the upward push. In addition to feeding off a persistently weak US Dollar, the Canadian is also drafting off an upward bias in key Canadian commodities. In order to get to a technical resistance point in the Canadian requires a look at the weekly charts, with the market seemingly poised to forge a rise back above the 95.00 level.

TODAY’S MARKET IDEAS: More Dollar declines ahead, with the Canadian becoming the primary leadership currency.

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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.