The Hightower Report

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

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

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

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

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

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

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

Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

DOLLAR: While the Dollar mounted a very impressive upward extension early in the trading session yesterday, the Dollar was unable to maintain those gains. With China making some statements that seemed to challenge the US Dollar’s global reserve currency status, we are not surprised to see the Dollar forge at least a temporary topping action on the charts. We also think that the trade is waiting and watching for the level of interest in the coming US Treasury auctions, as solid demand for the upcoming US issuance could suggest that money will generally continue to flow toward the US. However, it would appear that the trade is simply unwilling continue to throwing large amounts of money at the Dollar, unless the US can once again reinforce last week’s views that the US economy is into a recovery mode. While we think that the Dollar will generally retain most of the recent gains, the Dollar will have to get an as expected decline in Wholesale inventories today and it might also have to see strong demand for the first leg of Treasury supply later today. Critical support in the June Dollar Index is seen at 80.58 but pushed into the market this morning we would have to favor the downside in the Dollar.

EURO: Surprisingly the Euro charts also look vulnerable today and that would seem to suggest that neither the Dollar, nor the Euro looks to dominate sentiment in the early action today. With German April Industrial output overnight falling by 1.9%, the Euro would seem to be undermined, but with the German government also suggesting there is the chance of a bottoming in output, that tempers the vulnerability of the Euro this morning. In short, we see little in the way of domination in the currency markets, but the residual strength in the Pound, Canadian and Yen would seem to leave the Dollar and the Euro, as the weakest link in the marketplace. Near term support in the June Euro is seen at 138.35, but we can’t rule out a near term slide below the 137.50 level later this week.

YEN: The Yen saw some initial favor overnight but the currency was unable to hold that pulse up move. A normal retracement of the May to June washout in the Yen might allow for a bounce back to 103.20 but it could take a slight deterioration in the US economic outlook to give the Yen a definitive boost. In short, it might take noted declines in equity prices in order to put the Yen in an uptrend track.

SWISS: The Swiss truly looks to have slipped into a negative posture on the charts, and given the positive correlation between the Swiss and the equity markets in the April through June time frame, we have to leave the bias in the Swiss with the bear camp. Near term downside targeting in the June Swiss is seen at 90.96 and it could take a rise back above the 92.07 level to effectively turn the trend back to the upside.

POUND: The Pound is surprisingly into some favor this morning, along with the Canadian and that would seem to point to a revived upbeat macro economic outlook. However, the UK overnight saw a somewhat negative regional house price reading, but apparently that reading wasn’t as negative as some expectations. In other words, the bulls in the Pound continue to spin the fundamentals into their favor. We also think that the lack of definitive leadership in the currency markets has allowed the Pound and the Canadian to garner an undeserved edge. In short, the Pound is mostly winning by default.

CANADIAN DOLLAR: After a noted washout and recovery it would appear that the Canadian is back in favor. We suspect that part of the strength in the Canadian is the result of a lack of alternatives but we also think that some trend players are serving to push up the Canadian. We have to think that the bull camp in the Canadian needs some type of favorable action in the equity markets in order to continue to push higher on the charts. Support is seen at 89.94, with the first pivot point seen up at 90.26 today.

TODAY’S MARKET IDEAS: Little dominance in the currency markets but the Canadian, pound and Yen look to have the edge today.

Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

DOLLAR: The Dollar has given up its bullish bias and in the process the June Dollar index contract has made what appears to be an extremely bearish technical trade on the charts. In fact, seeing the June Dollar fall below the 80.00 level, after consolidating at that level early this week, should give the bear camp an added resolve. Clearly a wave of macro economic optimism has fostered the downside pulse in the Dollar and since that optimism is apparently being seen in a number of different physical commodity markets, we have to think that the trade will be able to press the Dollar consistently lower. We suspect that a weak revision of the US GDP readings will do little to alter the downward bias in the Dollar today, unless the data flow today completely derails the US equity markets. In fact, decent readings from the Michigan sentiment report could be enough to turn up the pressure on the Dollar significantly and in turn put the June Dollar contract down to the lowest levels since September 29th.

EURO: While the Euro is catching a ride from the liquidation wave in the Dollar, the hope of a global recovery is probably the real driving force of the Euro gains this morning. In other words, the currency markets, into the March lows in the Euro, saw the Euro zone as the worst place to be and now that the macro economic outlook has improved, many traders think that the Euro is one of the more undervalued currencies. With German retail sales figures also positive overnight that would seem to add some upward momentum to the Euro today. There might be little resistance in the June Euro until the 141.19 level.

YEN: A big range up move after a reversal seems to take the Yen out of the flight to quality long liquidation mode and in turn puts the currency into a mode to benefit from an ongoing improvement in the global economy. In fact, very favorable growth readings from the Japanese overnight could set the Yen up for a quick return to the 105.92 level in the coming trading sessions. In short, a nice transition, from one fundamental theme to another, suggests that the bull camp in the Yen has indeed regained control.

SWISS: With a big range up extension move in the Swiss overnight, that would seem to reaffirm the bullish bias and perhaps set the June Swiss up for a return to levels above the 94.00 zone. In fact, an old gap area up at 93.89 could be a near term target for the Swiss in the coming two trading sessions.

POUND: A fresh new high for the move in the Pound reaffirms the view that the Pound is a recovery currency. With the outlook for the global economy seemingly improving by the day, we would not be surprised to see the June Pound rise to the 170 level before the market is forced to deal with next week’s US unemployment report. With a series of longer term technical levels reached with the rally this morning, we suspect that a combination of ongoing short covering and fresh outright buying is set to leave the bull camp in control.

CANADIAN DOLLAR: With a very impressive range up extension on the charts, strong oil prices and strong precious metals price action, the Canadian would seem to have a number of bullish themes to choose from. Near term upside targeting is seen up at the next gap area of 91.60 to 92.42 in the June contract. As long as the equity markets are on the rise, we suspect that the Canadian is in for even more gains ahead.

TODAY’S MARKET IDEAS: The Dollar is the odd man out today, expect most currencies to make big runs at the expense of the greenback.