23May King Dollar is reigning today. See below for levels.
A worrisome observation we’re seeing again is one where the risks are seen as “well contained”, a constant comment for the last several years. As risks bubbles up, it is commented on as “manageable” or “nothing to worry about”, and then at some later point, it is seen as out of control in some way.Aussie:
23May With indications of slowing economic activity in Asia, the Aussie is likely to remain under some pressure.
More weakness focuses our attention on our noted bear flag formation achieving the targeted 0.9650, the lows from 22Nov. A sustained break out below this level targets the 03Oct low at 0.9302.
Volume has been stronger on the larger decline, and on the daily moves down themselves, but watch developing extreme Oversold conditions. Our measure currently registers 26 (up from a recent 11). There may be some needed short covering rallies or consolidations along the way.
That said, we remind readers that the latest negative pattern is showing accelerated falling action in comparison to the action from March through mid-April. This speaks to how rapidly events seem to be unraveling.
We see resistance near yesterday’s highs, just above .9900.
Volatility remains in the low average range and falling indicating the market is comfortable with the directional bias.
Seasonal Snapshot (cash): The 5-year pattern has a negative bias until 26May.
The 15&30yr patterns chop higher until 10May, then both fall out of bed throughout the rest of the month.British:
23May Poor Retail Sales is pressuring the Sterling to new recent lows. If our noted flag/pennant formation plays out, we see several possibilities. Both levels project measured moves to technically significant areas:
Based on either the 3-day plunge (350 points) the move could project to 1.5425. This level roughly correlates to where support was prevalent in late November through mid-December.
Based on the complete decline from the 4/30 peak (550 points), the move could project a move to near 1.5225. This is where support held on reversal moves in early October and mid-January.
In either case, this market seems to be setting up for a material move to the downside. Stronger Volume seems to be adding some validity to today’s drop below the flag. However, developing extreme Oversold conditions tells us to keep risk controls tight.
This morning’s release of BOE minutes revealed that there is growing momentum behind expanding quantitative easing:http://www.bloomberg.com/news/2012-05-23/b...ted-8-1-on...
We see resistance from 1.5800-1.5850. This is where the market showed support back in early through mid-April before running up to the highs. The falling 200-day moving average (1.5820) has offered resistance since the market fell below it last week.
Support is seen at the round number psychological levels of 1.5700 and 1.5650. Again, previous support levels that held before the market turned much higher. More weakness initially targets the 12Mar low (1.5601) before the above-mentioned levels come into play.
Volatility is Low and falling.
Seasonal Snapshot (cash): All three patterns have a quite negative bias until the end of May.Canadian:
23May Stronger Volume on a probe to new lows today may signal there is more room to the downside.
Our technicals remain quite negatively biased, with Trend and Momentum both clearly negative. Our Oversold measure has bounced from 10 to 25, but should still be watched closely. To this end, the Loonie has bounced off a probe to the –2 STD (0.9710) below the 21-day moving average (0.9985) again.
The falling 200-day moving average (99.25) that aligns with falling trend line old support going all the way back to January should offer new resistance if this market has a material bounce.
On more weakness, watch the series of previous lows: 9711 on 13Jan; 9675 on 9Jan; 9582 on 19Dec; 9497 on 25 Nov and finally, 9367 on 04Oct.
Canada’s Retail Sales is on deck for tomorrow AM.
Seasonal Snapshot (cash): All three patterns have a choppy, negative bias until 26May. The 30yr’s is more protracted than its shorter-term counterparts.Dollar Index:
23May After failing to make new highs on Friday, and subsequently selling down to and holding above the mid-January support level (81.05), the DX has resumed its upward trajectory. Today’s action takes it to the highest settlement since the 1/13 peak.
Technicals remain quite positive, but another leap higher in our already toasty Overbought measure (currently 78) is still well short of the 97 registered on 16&17May.
Watch for further gains if European debt issues keep bubbling up in the news. This has been a primary driver of safe-haven buying of US risk-off assets.
Support below 81.00 is difficult to see with clarity, as there are so many trade gaps below the market since the latest rally began. 80.35-80.40 would be the first level we’d recommend watching. This is where the market failed to go higher in early/mid-April.
Bigger picture, we remind readers of our past comments:
“Watch for any evidence the Dollar is not the safe haven under crisis market conditions. This would change existing assumptions dramatically.”
Seasonal Snapshot: The 15&30yr patterns consolidate in choppy fashion until the end of May. The 5yr declines during this period.Euro-FX:
23May As we have noted, the break below 1.2700, has given way to much lower pricing. Today’s fall to a two year low tested the –2 STD (1.2535) below the 21-day moving average (1.2965). This area also aligns with trend line support that extends back to Jan. It has again acted as a brake on falling action. If this level continues to act as a trading pivot, the Euro should find some resistance around the bottoming action from mid-January (1.2630).
A sustained move lower should first target psychological support at the round pennies down to 1.2000, maybe as low as 1.1500. The June 2010 low was 1.1874.
Resistance lies above near 1.2800. This is both a psychological level and the recent highs..
As we stated on 5/10, the Euro has and probably will probably remain under pressure so long as the political crises continue to roil the Euro-zone.
Seasonal Snapshot: The 5&15yr patterns consolidate and the 30yr pushes lower until the end of June.Yen:
23May The Yen is right back to where it started yesterday after BOJ resisted adding more monetary stimulus. Yesterday’s downgrade by Fitch held the rising 21-day moving average
If the Dollar Index’s behavior last Summer is any indication of the Yen’s future, the BOJ will likely be back at the window in the near future. Last Summer’s S&P downgrade of US debt was followed by a 9% rise in the DX.
Volume has been strong the last two sessions. Our technicals indicators are currently tilting negative, but have been unstable inside recent rising Volatility.
Support remains near the 12465 level, resistance going back to late February. Resistance is just below at old support and the recent highs (1.2600).
Seasonal Snapshot: Modest weakness in all three patterns will turn positive for a week on 1May, then consolidation into the first part of June.
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