Comments Like This I Have Not Seen Before
With a bank holiday here in the States, expect
some relatively quiet trading after Friday’s selling of the dollar on the heels
of the weaker than expected payroll data. Nonetheless there are some key points
to note both from a macro and technical standpoint.
Macro Notes:
Comments from Dallas Fed
Governor McTeer on Friday were rather interesting. When asked about the current
account deficit, he responded:
“In order to correct it
with income growth we have to have artificially depressed growth pushed down
below our trading partners in order to correct it. The other alternative is a
depreciating dollar. While I cannot comment on that specifically, over time, I
think there is only one direction for it.â€
While this has long been a
suspicion of FX traders, comments like this have not been heard before.Â
There is scant data out
this week with the exception of the trade deficit data due out on Thursday.Â
This will likely have an impact on the dollar if it were to show a continued
deterioration.
Technical Notes:
EUR/USD:Â despite a solid
performance on Friday, the EUR was still not able to take out 1.2444. Until
this level gives way, expect more sideways action.
USD/JPY:Â look for
108.80-109 area to offer some support and with rumors swirling again that the
BoJ may also do some “verbal†or actual intervention, large moves lower seem
unlikely without some sort of new event to provide a large catalyst.
USD/CHF:Â solid
break-down on Friday, but still has not taken out 1.2447. Shorter-term model
shows resistance at 1.2537, this may provide a solid entry on the short-side
should that level fail. 1.2395 would be the next logical price objective should
that occur.
AUD/USD:Â the commodity
currencies are back in play, but bouce from Friday seems to be maturing. Look
for some price pull-backs towards .7320 for better long entries on intra-day
trades.
NZD/USD:Â technical
divergence on daily chart as price high not confirmed by stochastic. Orderly
pull-back in overnight session to support at .6815, but with daily and weekly
momentum waning, there are better pairs to focus on.
Open Trades:Â
Out longs
in EUR/GBP and AUD/NZD seem tired at present, but with no real downside action,
there is no need to cut them at present. AUD/NZD needs to breach 108 and 108.14
to provide a catalyst to higher levels, while .6950 on EUR/GBP needs to be
breached in order to have a shot at .6975 (Jan ’04 monthly break).