The Hightower Report

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DOLLAR: After some heavy initial pressure overnight versus the Euro, the Dollar has found some support as the reality of the Greece situation has taken some downside momentum out of the market. While having concrete details about a potential $40 billion EU/IMF aid package provided European currencies with a measure of support this morning and that in turn undermined the Dollar, it is important to remember that Greece still has to ask for this aid first, something that they have not done yet. The market may have to wait until Greece tries to sell some debt in the market this week before we see whether the aid package will be implemented. With little in the way of economic input from this side of the Atlantic, before the Treasury Budget announcement late in the session today, we may continue to see the focus of today’s trading remain on European issues. While well below its recent range, look for the Dollar to remain toward the upper end of today’s early trading range and possibly head back towards the chart gap area that was left just above the 80.85 level. A number of markets seem to have had a major knee jerk reaction to the EU Package news and have failed to sustain their initial reactions and that might suggest that all markets have indeed over reacted. Therefore we suspect that the June Dollar index will manage to hold above close-in support of 80.52 today. The Commitments of Traders Futures and Options report as of April 6th for US Dollar showed Non-Commercial traders were net long 30,248 contracts, a decrease of 5,040 contracts. The Commercial traders were net short 33,306 contracts, a decrease of 6,158 contracts. The Nonreportable traders were net long 3,058 contracts, a decrease of 1,117 contracts. Non-Commercial and Nonreportable combined traders held a net long position of 33,306 contracts. This represents a decrease of 6,157 contracts in the net long position held by these traders.

EURO: The June Euro started out overnight trading above its trading range for the past few weeks, but it has been unable to build upon that sharp rally as the market appears to be somewhat skeptical of whether the EU aid package will live up to the initial hype. Although Greece is saying that they have not yet asked for this aid, it is clear that a 200 basis point benefit from where Greece debt currently trades and what the EU/IMF package will charge in interest almost compels them to go with the aid. Also, there are some strong doubts that this 16-nation consensus will hold, if other EU nations come forward asking for help, or if possible Greece repayment problems escalate into a test of the EU’s “no-bailout” clauses. The timing of these announcements over the weekend had no small part in the market’s severe reaction to this aid package, and has likely helped the June Euro put in a near-term high. While remaining well supported, it is more likely that the June Euro will move back towards Friday’s highs around the 1.35 level than make a test of the overnight highs near 1.37. The Commitments of Traders Futures and Options report as of April 6th for Euro showed Non-Commercial traders were net short 64,017 contracts, a decrease of 19,183 contracts. The Commercial traders were net long 73,813 contracts, a decrease of -22,152 contracts. The Non-reportable traders were net short 9,796 contracts, a decrease of 2,969 contracts. Non-Commercial and Non-reportable combined traders held a net short position of 73,813 contracts. This represents a decrease of 22,152 contracts in the net short position held by these traders.

YEN: Early strength from the broad-based Dollar weakness has dissipated, and the June Yen looks to be weaker going into the opening. Comments made by Bank of Japan officials indicate that there is a difference of opinion on the need for more Japanese rate cuts in the near future. However, the deflationary economy in Japan may ultimately have the final vote and that should keep the June Yen lagging behind most of the major currencies over the near future. Look for the June Yen to continue its move below the 107.00 level.

SWISS: The June Swiss has received the most carryover support from this weekend’s EU/IMF deal, gaining back much of what it lost from last week’s post-intervention sell off. However, the near-term easing of Greece debt tensions will continue to keep the June Swiss under pressure against the Euro and should keep the market well away from making new highs. Even so, the June Swiss is more likely to hold last night’s lows near the 94.25 levels, as its overnight move was nowhere near as violent as the June Euro move.

POUND: Although the June Pound has extended last Friday’s rally into this week, early strength has been eroding as the market appears tentative to move outside of its recent range. Political factors are starting to override economic numbers, as the first weekend of the election period saw agreement over the issue that a “hung” Parliament would be problematic for the UK economy. With the Dollar still likely to remain weak this morning, look for the June Pound to stay above the 1.54 level but it is also unlikely to make a move towards new highs.

CANADIAN DOLLAR: June Canada is still coming under pressure from Friday’s Canadian Employment numbers, but has held those lows and is still within sight of parity this morning. The weak US Dollar this morning may keep the market on the defensive, but given the underlying strength in the Canadian economy, it is unlikely that we will see a move below this recent trading range. June Canada may test the lows later today, but is also likely to head back towards the 99.75 level over the next day or so, with another attempt to break above 100.00 likely in the cards this week.

TODAY’S MARKET IDEAS: While European strength is likely to be the story of the day, we may have already seen the highs made during overnight trading. Look for a successful test of the lows today as a first step towards the June Canada making another run at parity with the US Dollar.

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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 has shown periodic strength but we just don’t get the impression that concern for the global economic outlook is going to be bad enough, to definitively sustain gains on the Dollar Index charts. However, it would seem as if a large portion of the G8 is interested in talking up the Dollar, (because a weaker Dollar will boost the Euro and hinder the European recovery effort) and therefore the Dollar might show some near term strength, but we doubt that the June down trend pattern in the Dollar has run its course. In fact, the June 30th Commitment of Traders with Options report for US Dollar showed the Non-commercial position to be net short 6,816 contracts, with the Non-reportable position net short 1,607 contracts, and that made the “combined” spec and fund position net short 8,423 contracts as of early last week and therefore the technicals in the Dollar remains somewhat oversold and that could allow for temporary bounces ahead. However, we would suggest that position traders wait for a return to 81.16 in the September Dollar Index to get short the Dollar. We suspect that a favorable Treasury auction today could provide the Dollar with some minor lift but that the majority of the strength in the Dollar will come from jaw boning ahead of the G8 meeting.

EURO: While we don’t think that the Euro has ended the June up trend pattern on the charts, we do think that the Euro is going to have a difficult time carving out additional near term gains. However, seeing German Manufacturing readings for May forge a slight improvement and seeing economists conclude that the German economy is getting beyond the worst of the recession, could put the Euro in a position to make gains against the Dollar later in the week. Up trend channel support is seen at 138.86 today, with that trend line support rising to 139.08 on Wednesday. The June 30th Commitment of Traders with Options report for Euro showed the Non-commercial position to be net long 17,494 contracts, with the Non-reportable position net long 7,400 contracts, and that made the “combined” spec and fund position net long 24,894 contracts as of early last week. As in the Dollar, we would prefer to buy the September Euro on a set back to 138.86.

YEN: The September Yen continues to waffle around in sync with the global equity market outlook. With stocks making a slight recovery bounce at the end of the trading session on Monday and international equity markets showing periodic strength overnight that could leave the Yen in a slightly weak posture today. However, given the suspicion on the track of the global recovery effort and the idea that the US economy might need a second stimulus package, we doubt that the Yen is going to completely abandon the upward tilt seen for most of the month of June. We would suggest that traders look to be buyers of a near term break back down to 103.70 in the September Yen contract.

SWISS: While the Swiss might forge periodic aggressive recovery bounces, we doubt that the September Swiss will throw off the pattern of lower highs and lower lows that have been seen since June 2nd. Traders should look to the 92.53 level in the September Swiss, as a place to implement fresh short side plays.

POUND: We suspect that the Pound is going to remain in a downward motion on the charts in the near term. While periodic attempts to recover in the equity markets might give the Pound temporary respite from the selling pressure, we suspect that prices are set to work lower over the coming 5 trading sessions. With a UK May manufacturing output reading overnight coming in down 0.5%, off expectations of a +.2% gain, it is clear that expectations toward the UK economy are simply not being met. We would suggest that traders look to get short the September Pound at 163.21 for an eventual continuation on the downside pattern.

CANADIAN DOLLAR: While the Canadian might show some recovery action today, we don’t get the impression that the Canadian is set to throw off the downward bias that has been in place since June 1st. However, interest in commodity shares and the prospect of a consolidation in world equity markets just ahead might give the September Canadian the temporary capacity to respect consolidation support of 85.92. It could take news of a second US stimulus package to put in a solid bottom in the Canadian Dollar.

TODAY’S MARKET IDEAS: We suspect that the Dollar will firm into the G8 meeting but then fail again later in the week.

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DOLLAR: The Dollar was clearly racked with selling in the wake of the Fed’s historic move and while that could ultimately serve to benefit the US export sector, it is possible that the sharp slide in the Dollar could spark protectionist moves from some foreign central banks! In fact, with the Swiss National Bank recently indicating they were looking to reduce their exchange rate versus the Dollar, the sharp slide in the Dollar represents a real challenge to their desires. As in the stock and the bond markets, it is difficult not to expect some form of follow through given the “shock and Awe” presence that seems to be in place after the Fed’s historic move. In fact, given the magnitude of the slide in the Dollar, we suspect that technical stop loss selling is a force that will continue to weigh on the Dollar during the trade today. However, the 84.00 level in the June Dollar index would seem to offer up at least some form of support, but in the current environment where major historical changes are being seen, one has to be careful in any attempt to fight the tape, or in this case, fighting the US Fed. One might suggest that the Dollar will remain weak until the trade begins to think that inflation, not slowing has become the biggest problem for the US economy.

EURO: With the explosion of the Euro in the prior trading session clearly violating a series of critical technical levels on the charts, we suspect that the bear camp is for a short time going to be rocked back onto their heels. Some traders see the 135.00 level as a critical pivot point, but for the time being the 135 level looks to become critical support, with the next initial resistance level seen up at 136.54. While we doubt that the June Euro is capable of a quick return to long term down trend channel resistance line up at 139.74, that resistance level does fall to 139.54 by early next week. In short, the bias is up in the Euro, as it settles in above the 135 level.

YEN: Surprisingly the yen managed an explosive rally in the face of a wave of euphoria in a number of markets. In other words, the Yen was up and overall conditions weren’t exactly screaming flight to quality buying. However, some traders see the prospect of rekindling inflation ahead and that apparently pushes some money back toward the Yen. Near term resistance is pegged at 105.00 but that level could become support quickly in the coming trading sessions.

SWISS: The Swiss exploded to the 88.00 level and it would appear that the June Swiss has a gap area partially above the market at 88.50 to 88.98. It is possible that the Swiss could begin to get some speculative buying off the inflationary ramifications of the Feds move and that could ultimately set the June Swiss up for a rise to the 90.00 level.

POUND: There is little in the way of resistance in the Pound until the down trend channel line at 145.04, but that level falls down to 144.88 on Friday morning. However, we suspect that the Pound is poised to see the least impressive rise off the weakness in the Dollar, because the UK has a very similar economic condition to the US, and sustained slowing in the UK economy could mean that yields in that currency might remain low for longer than many other areas.

CANADIAN DOLLAR: It goes without saying that the Canadian got one of the biggest bangs out of the US move. In addition to helping the commodity component of the Canadian, the aggressive wave of stimulus from the US clearly benefits Canadian interests as a major trade partner. With the Dollar strength over the last six months pounding the Canadian, the sharp slide in the Dollar, now looks to prompt noted long term short covering buying in the Canadian. Near term resistance in the June Canadian is seen up at 81.17.

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DOLLAR: The Dollar continues to show signs of a downside breakout on the charts and the fact that the slide this week comes in the face of talk about intervention that could have supported the Dollar really highlights the current weakness in the US Dollar. Clearly seeing four days of gains in world equity markets deflates the flight to quality angle significantly and we assume that is the main reason why the Dollar has come under pressure this week. Since the US equity market rally looks to continue in the early going today, we have to think that the Dollar will also remain under pressure. In fact, even in the face of a potential narrowing of the US Trade Deficit this morning, we doubt that the Dollar will garner the least bit of fresh buying interest from the scheduled data. In other words, the market looks set to deflate the Dollar and more gains in the stock market looks to facilitate pressure in the Dollar directly ahead.
Another angle that might explain the shift in the Dollar is the talk that several central banks besides the US, have recently hinted at quantitative easing and that might be seen as a sign that other central banks are pulling ahead of the US in attempting to head off the recession.

EURO: With the Euro managing another new high for the move this morning and the Dollar showing more weakness today it would seem like the pulse up pattern in the Euro is set to extend for at least another trading session. Clearly a tamping down of severe global macro economic anxiety is giving the bull camp its edge in the Euro, but the talk from the SNB about quantitative easing and or currency intervention might also be forces lending some support to the Euro. Some traders are suggesting that the Euro is poised for a rise back above the 130 level and perhaps even for an eventual run up to the 130.87 level.

YEN: One doesn’t even need to look at the charts of the Yen this morning to know that the path of least resistance is set to remain down, as further declines in fear and anxiety look to keep up the pressure on the Yen. In fact, the Japanese floated a dismal Consumer Confidence reading overnight and with a large portion of the world looking for more risk, instruments like the Yen and the Dollar look to be out of favor. Near term downside targeting in the June Yen is seen at 101.04 and perhaps even lower if the euphoria in the equity markets extends throughout the trading session today.

SWISS: Apparently the talk of quantitative easing and or the talk of some form of currency intervention have left the Swiss out of the group of currencies gaining on the recent slide in the Dollar. However, if anxiety is set to come down, we have to think that the 84.00 level in the Swiss has become some form of value! On the other hand, buying significant weakness in a commodity hasn’t historically been a very good trading style and therefore Swiss still seems to be a “following” market instead of a “leadership” market.

POUND: While the Pound has been late to the party it is showing signs of capitalizing off the ongoing weakness in the US Dollar. Given the beat up nature of the Pound this morning and the dire macro economic expectations for the UK economy recently factored into the Pound, we suspect that the currency deserves some type of recovery action. With a 30 day moving average seen up at 142.70, the bull camp would seem to have the edge today but in order to totally throw off the down trend pattern, the June Pound would have to mount a rally above down trend channel resistance, that is all the way up at 145.50.

CANADIAN DOLLAR: After a temporary upside breakout in the Canadian, one gets the sense that the Canadian is poised to make a move off its recent consolidation lows. However, the Canadian will be presented with a critical labor report this morning and that could provide at least a temporary drag on the currency this morning. With the BOC being questioned about the use of quantitative easing recently that could hint at the prospect of a key bottoming in the Canadian. However, without a noted upside breakout in the Canadian this week, in the face of the massive recovery in the stock markets, it is clear that the Canadian has a lot of baggage holding it back.

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DOLLAR: With the Dollar seeing a quasi technical correction off the Wednesday high and global macro economic anxiety on the rise again, it is likely that the Dollar will resume its upward track on the charts. While the Dollar might gain some momentum, the early gains weren’t nearly as impressive as one might have expected in the wake of the sharp slide in global equity prices overnight. However, the Yen is garnering some of the flight to quality interest and that has sapped buying fuel from the Greenback. For the time being the trade seems to be content to turn to both the Dollar and the Yen in the face of the latest downside shift in macro economic sentiment. Near term upside targeting in the March Dollar index is seen up at 88.71, with close-in pivot point support in the Dollar seen at 87.92. While some favorable UK retail sales figures could have tamped down some of the anxiety this morning, the markets are apparently not going to be easily distracted from their current economic focus. Perhaps the somewhat favorable UK retail sales readings were more than countervailed by news that UK home repossessions touched a 12 year high last year. In short, the world is concerned about more severe slowing ahead and that should leave money flowing toward the US Dollar.

EURO: With some soft Euro zone PMI readings this morning and seeing the German PMI hit a record low, that clearly highlights the ongoing and perhaps escalating threat of severe slowing and that in turn has clearly reversed the recent strength in the Euro. In fact, despite some ECB efforts to restore confidence with its overnight dialogue, it would appear that the pressure looks to return to the Euro currency. In fact, a number of analysts think that the March Euro is poised to fail at the 125 level and that the currency could possibly fall down to the November consolidation lows around the 124.00 level. Once again, the ECB failed to react quickly and it also failed to throw everything it could at the slowing from the stimulus front early in the crisis and that means the Euro will continue to be out of favor in the face of bouts of widespread global economic anxiety.

YEN: Despite the fact that one Japanese stock measure managed a fresh 26 year low overnight the Yen appears to be back in favor from the flight to quality angle. In fact, despite a significant downward revision in Japanese economic expectations early in the week, the Yen and the Dollar appear to be the choice for flight to quality buying in the currency markets. However, we get the sense that the magnitude of the upside in the Yen, on the coming run up, might be less intense than the early January rally.

SWISS: One look at the chart in the March Swiss and it is clear that the combination of renewed global macro economic anxiety and a widening of the US probe into UBS, has left the currency aggressively out of favor. In fact, given the propensity for widespread and intense macro economic anxiety ahead a decline below the 84.00 level is possible this morning in the Swiss. Until something very significant changes, the path of least resistance in the Swiss is expected to point downward.

POUND: The Pound was initially able to hold around the prior session’s close because of a surprising up tick in UK retail sales. However, with UK home repossessions apparently reaching a 12 year high in 2008, it is clear that the UK economy is serving to keep the Pound somewhat off balance. We see no reason why the Pound won’t continue on the downside, despite the attempt to bounce in the prior trading session. Down trend channel resistance is seen all the way up at 148.14 today, but more significant and relative resistance is pegged at 144.51.

CANADIAN DOLLAR: The Canadian in the early going is holding up but we can hardly rule out a retest of the February low down at 78.88 in the wake of a rush toward the Dollar early today. We expect the Canadian to correlate with the equity markets and in the early going today, the stage looks set for downside follow through in the equity markets and that should turn up the selling pressure on the Canadian.

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DOLLAR: The Dollar has also reversed course in the face of the surge in optimism in the wake of the latest US government “plan” for housing. Since the Dollar is clearly a flight to quality instrument, seeing a slight tempering of the anxiety in the equity markets logically prompts some profit taking in the Dollar. Unfortunately for the bull camp in the Dollar, up trend channel support in the March Dollar index is seen all the way down at 85.35 today and but that support climbs back up to 85.53 early next week. Surprisingly much weaker than expected Euro zone GDP data failed to provide the Dollar with any support this morning and that suggests the markets are fixated on something other than the data. Closer in support in the March Dollar index is seen at 85.97 and it is possible that the Dollar will see some late afternoon buying off the idea that the US stimulus package is thought to be finalized this weekend. Overall we suspect that ranges in the Dollar will be somewhat narrowed today.

EURO: With a record slide in the Euro zone 4th quarter GDP reading and similarly weak German GDP readings also floated last night the Euro looks to remain mired in this week’s consolidation zone. However, some players might want to press the Euro later in the trading session off the idea that the ECB might be pressed for more aggressive easing in this weekend’s G7 meeting. In fact, the trade thinks that the US Treasury Secretary is set to push both the ECB and Italy to provide aggressive easing steps and that could leave the Euro open to a slide back to consolidation support of 128.02. Overall it is very difficult to get bulled up toward the Euro because of the sagging euro zone fundamentals and also because of a generally bearish technical picture on the Euro charts.

YEN: Just seeing the latest “plan” to save the US housing market was enough to turn up the profit taking pressure on the Yen. However, the Yen was and still is a flight to quality currency and given the slightly overbought levels around this week’s highs, it is not surprising to see the March Yen streaking back toward the early February lows. In fact, as long as the latest plan is being spun as a positive and as long as the stock markets are showing signs of bouncing, the bear camp in the Yen has the edge.

SWISS: The Swiss remains in a down trend pattern on the charts with a series of lower highs clearly in place. Apparently the Swiss doesn’t even warrant a short covering bounce this morning in the wake of a slide in the US Dollar and to us that clearly points to a currency that is way out of favor.

POUND: After a literal beating early in the week, the Pound has clearly seen some technical short covering buying interest. We also suspect that the Pound is seeing some benefit from the latest US plan to save those behind on their mortgages. However, the ills in the UK banking sector and the lingering problems in the UK economy are not eliminated by the latest US plan and therefore we have to suggest that a March Pound rally back up at 146.96 will still be considered a sale. Some players suggest that the Pound will be dealt a slight blow by the developments from the weekend G7 meeting and that could push the Pound down early next week.

CANADIAN DOLLAR: Apparently the Canadian has rejected the sub 80.00 level and would now seem to be poised to climb all the way back to the 82.50 level on the charts. Apparently the latest US housing plan and or the proximity to the official passage of the US stimulus package, is providing the Canadian with renewed buying interest today. While it might not last long, the bulls in the Canadian have an initial edge today.

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DOLLAR: After a significant upward pulse on the charts yesterday the Dollar appears to be into a profit taking setback this morning. While there was a significant amount of fresh news out from the UK banking sector again overnight, it is clear that flight to quality buying of the Dollar has abated for now. In fact, we suspect that the Dollar will see a further slide in the wake of the scheduled US numbers this morning. Near term downside targeting in the March Dollar is seen at 85.82 in the wake of the US housing starts and permits data this morning. With a large portion of the strength in the Dollar over the last two weeks, coming from evidence of severe international slowing and also from UK banking concerns, it is clear that without the turmoil and fear outside of the US, the Dollar looks to settle back into a weak corrective bias. Longer term up trend channel support off the December and January upward pattern in the Dollar, leaves up trend channel support line today down at 83.97 but that level rises to 84.12 on Friday.

EURO: While the Euro would like to mount a bit of a bounce in the face of patently weak US data flow this morning, the Euro zone produced some discouraging readings overnight in the form of a decline in a French Household Consumption survey and from a noted decline in November industrial orders. Furthermore, the ECB also pointing out ongoing negative spillover into the main economy from the financial sector uncertainty and that would seem to limit the Euro’s capacity to bounce. However, the Euro should be able to garner some light short covering interest in the wake of the soft US numbers, but overall any rally in the Euro should still be considered a rally within a bear market. Near term resistance on the charts is seen up at 130.80 basis the March Euro.

YEN: After a sensational burst on the upside in the prior trading session, the Yen appears to be moderately but perhaps only temporarily overbought. However, the path of least resistance remains up in the Yen, with negative talk from the BOJ overnight almost completely discounted. With lingering banking sector troubles still present under the surface we have to think that the March Yen is poised to return to the 115 level in the coming trading sessions. However, traders can’t rule out the prospect of a setback to 112.35 before the market returns to the classic flight to quality posture.

SWISS: The Swiss remains in a downward motion on the charts. In fact, little seems to have changed in the Swiss and unless the Dollar weakens significantly in the wake of its data flow today we doubt that the March Swiss is capable of mounting a sustained bounce back above the 86.96 level. Sell rallies until a major shift in global macro economic sentiment is seen.

POUND: While the aggressive pressure toward the UK banking sector has abated somewhat, one doesn’t get the sense that the market is finished with the concern of a major failure in that sector of the UK economy. However, news that the UK wasn’t planning to totally take control of its bank sector would seem to leave the market fearful of even more turmoil ahead in the UK Banking sector. While some Euro zone officials have expressed concern about the ultra low Pound exchange rate, it would not seem like there is a move a foot to halt the slide in the Pound. Therefore, the path of least resistance remains down with the Pound likely to settle in below the 2001 spike low.

CANADIAN DOLLAR: The Canadian appears to be giving off a weak bottoming signal on the charts this morning but the sideways consolidation action might be more of a function of temporary weakness in the US Dollar, than it is a bullish view toward the Canadian currency. In fact, with the threat of global slowing remaining in place and in some cases expected to show even more weakness ahead, that should mean rallies in the Canadian Dollar should still be considered a selling opportunity.

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DOLLAR: It would appear that the “New Year” euphoria has waned in the Dollar and that might also be anticipation of disconcerting US numbers directly ahead. It is also possible that the markets are now shifting their attention toward the quantitative easing angle and that shift is apparently given less credence than the classic easing moves. It is also possible that a heavy amount of US debt supply has caused a temporary pause in the buying interest in the Dollar. In fact, with Germany posting a jobless increase of 18,000 overnight and the German jobless rate also jumping by .3%, the Dollar could have garnered a lift this morning but instead the trade is still short term bearish toward the Dollar. Even with a slightly favorable ISM Non farm manufacturing reading from the US in the prior session the trade was unable to hold the Dollar up and that suggests a near term setback, perhaps down to the 82.75 level in the coming 36 hours of trade.

EURO: Perhaps the news of a German rescue package distracted the market from the flow of discouraging Euro zone economic news overnight, or perhaps the long interest in the Euro is simply coming as a result of bearish sentiment of or simply technical profit taking in the US Dollar. However, the Euro might see close-in resistance up at 136.28 and then again up at 136.92 in the lead up to the US Non farm payroll report. However, given all the negative expectations for the upcoming US payroll report, we suspect that the Euro will see a buy the rumor sell the fact response to the figures. In other words, the Euro has a near term rally window, but probably isn’t poised to launch into an uptrend pattern.

YEN: Logically the Yen is seeing some bounce in the wake of the reversal in the Dollar in the prior trading session. However, the Yen trade seems to be heavily orientated toward the ebb and flow of flight to quality psychology and we suspect that the Yen could see a violent and two sided trade over the coming 48 hours of trade. On the other hand, some traders probably see the recent low in the Yen as a value zone and a certain portion of the market is probably going to get long the Yen ahead of the Friday US reports and that could set up a near term rally in the Yen and a very significant pivot point on Friday morning.

SWISS: Like the Yen, the Swiss is seeing a combination of short covering and perhaps fresh buying off anticipation of a weak US number on Friday morning. In short, expect a near term bounce perhaps up to the 91.53 resistance zone in the March Swiss contract.

POUND: The Pound has managed a recovery bounce and that bounce seemed to come from improving macro economic expectations for the US! However, unless the outlook for the US continues to improve, we suspect that the UK economy will remain in a very precarious position and therefore the Pound bounce off the January low, looks to be somewhat suspect into the US Non farm payroll report on Friday morning. Perhaps the March Pound will manage a rise above 150 today but we think the risk to the longs is on the rise unless the US numbers Friday come in better than expectations.

CANADIAN DOLLAR: With another new high for the move in the Canadian on Tuesday, the Canadian hanging within striking distance of the prior high this morning and the Dollar showing weakness, we have to leave the edge with the bull camp today. In fact, it is possible that the Canadian manages a rise above the 85.00 level ahead of the US payroll report, but unless the US jobs situation proves to not be as bad as expected, we doubt that the Canadian is poised to forge a sustained up trend pattern.

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DOLLAR: The Dollar attempted a quasi upside pulse on Wednesday and periodic strength in the Dollar over the last two weeks has served to dampen the confidence of the bear camp. As in the equity markets, we think that the latest GMAC developments have given the Dollar a temporary lift. We also think that a couple slightly better than expected US economic reports earlier this week prompted some short covering in the Dollar, but we don’t get the sense that the Dollar is poised to see fresh sustained out right buying. In fact, with a US ISM manufacturing Index reading due out this morning, one should expect resistance at 82.67 in the March Dollar Index to be rather solid. Some players suggest that year end short covering in the Dollar and year end long profit taking in the Euro, were largely responsible for the recovery bounce in the Dollar off this week’s early lows and that would suggest that today will bring about a resumption of the downside effort in the Dollar in the coming trading sessions.

EURO: Certainly some year end profit taking served to knock down the Euro on Wednesday, but if that was the main reason behind the slide Wednesday, that should clear the way for a recovery bounce in the Euro later today. However, at least initially the market seems to remain off balance and vulnerable to more selling, especially if the US stock market manages to trade positive early today. Therefore, one might expect an attempt to retest the Wednesday low of 138.17, but we think that weakness in the Euro in the coming trading sessions should be viewed as a buying opportunity for a possible rally in the Euro later next week into the next monthly US Non farm payroll report.

YEN: Like a number of other financial markets, the Yen seems to be under a slight bit of pressure because of a temporary tamping down of global macro economic anxiety. In other words, a couple slightly better than expected economic readings and residual holiday trading activity seems to have pushed the safe haven buying temporarily to the sidelines. In fact, in the face of a slight upward extension in the US equity market today, it is possible that the March Yen will see a temporary slide below critical support on the charts at 110.08. As in the Euro, a slide in the Yen in the coming two trading sessions should be seen as a buying opportunity in the Yen ahead of the next US unemployment report.

SWISS: As in the Euro and Yen, the flight to quality angle is simply not playing in the Swiss early today. Therefore, we suspect that the Swiss is poised to see a slight downside extension in the trade today. In fact, the failure to hold above 94.00 might turn up the technical liquidation bias in the Swiss early in the action today.

POUND: With news that UK lending improved that has to take some of the fundamental pressure off the Pound. However, the Pound didn’t show much in the way of a bounce off the favorable news in the early going today and that suggests the overall downtrend bias in the Pound remains in place. In fact, news that Halifax house prices declined sharply again and the expectation of another weak US ISM reading this morning, should leave the overall bias in the Pound pointing downward.

CANADIAN DOLLAR: The coiling pattern in the Canadian continues but in looking at the chart formation, one does come away with a generally bearish bias in the Canadian Dollar. With oil prices moderately lower and a host of physical commodities showing initial weakness today we have to think that the March Canadian is poised to fall toward consolidation support down around 81.60.