USD: The Dollar has fallen back from last week’s spike high because of a minor bounce in the Yen and perhaps because of a slight increase in global economic optimism, that in turn was largely the result of ongoing gains in global equity markets. Perhaps the Dollar was short term overbought into last week’s highs, especially with the COT report showing the Non-reportable Net Long position to have hit a new record level at 9,529 contracts. The Commitments of Traders Futures and Options report as of May 14th for US Dollar showed Non-Commercial traders were net long 35,020 contracts, an increase of 2,964 contracts. The Commercial traders were net short 44,549 contracts, an increase of 5,074 contracts. The Non-reportable traders were net long 9,529 contracts, an increase of 2,110 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 44,549 contracts. This represents an increase of 5,074 contracts in the net long position held by these traders. However, even if the Dollar is technically overdone, ideas that the ECB is poised to leave easy money policies in place for a long time, could leave the Dollar with the interest rate and macro economic differential edge and that in combination with even weaker Yen action ahead could easily spell more sharp gains in the Dollar ahead. Near term support in the June Dollar is seen at 84.00, with closer in support seen at 84.04.
EUR: With a gap down opening to start the new trading week, it is clear that the May slide has continued into another week in the Euro. Positive US economic data at the end of last week and ECB official comments suggesting that easy money policies will remain in place as long as they are needed, has seemingly left the June Euro on a track to test and fall below the 127.50 level this week. With the US Treasury Secretary suggesting that the US could achieve 3.5% growth, that in turn would seem to leave the macro economic differential between the US and Europe weighing heavily on the Euro. In fact, we see little prospect of the Euro avoiding the lowest exchange rate level since November of 2012 later this week. The bias is down but it could accelerate if there is even the slightest revival of fear toward Spain or Italian sovereign debt issues. The Commitments of Traders Futures and Options report as of May 14th for Euro showed Non-Commercial traders were net short 46,235 contracts, an increase of 13,034 contracts. The Commercial traders were net long 66,722 contracts, an increase of 19,407 contracts. The Non-reportable traders were net short 20,486 contracts, an increase of 6,372 contracts. Non-Commercial and Non-reportable combined traders held a net short position of 66,721 contracts. This represents an increase of 19,406 contracts in the net short position held by these traders.
GBP: Talk of signs of recovery in the UK economy is serving to underpin the Pound this morning, but weakness in the Dollar is probably making the minimal gains possible. 5 1/2 year highs in the FTSE might have lent some fresh support to the Pound and it is also possible that comments from King to his successor suggesting a lack of transparency on the duration of BOE QE has provided a small measure of support this morning. Initial support is seen at 151.70 and then again down at 151-54. In the end, the Pound could remain vulnerable to almost anything positive from the US scheduled report front.
JPY: The Yen has managed a slight bounce overnight perhaps because of the extremely oversold short term technical condition seen at the end of last week. Perhaps strength in global equity markets provided the Yen with some of its lift overnight but it is also possible that the Yen derived most of its lift from comments from the Japanese Economic Minister who suggested that further Yen corrective action could have negative consequences. However, until the Japanese economy begins to show consistent signs of improvement it could be very difficult to call for an end to an extremely well defined down trend pattern in the Yen. Down trend channel resistance today is seen at 98.43 but that resistance falls down to 98.09 by this Friday.
CHF: Like the Yen, the Swiss has managed a short covering bounce from what might have been a severely compacted oversold technical condition on Friday. However, the economic and interest rate differential relative to the US Dollar should make it very difficult for the Swiss to forge anything but a minimal recovery bounce. Initial resistance is seen up at 103.73 and to see the Swiss rise above that level might require some positive numbers out of the Euro zone. A normal retracement of the May slide in the Swiss is seen up at 104.64 but to return to that level, might require something very significant from the headlines.
CAD: With a massive spike down washout at the end of last week, the Canadian enters the new week at least partially oversold. Recent inflation data has removed the prospect of a hike in Canadian rates and we also suspect that ongoing declines in metals and energy prices provide an added element of pressure to the Canadian Dollar this morning. In the short term, it could be difficult to send the June Canadian back down below the 97.00 level, but a recovery back to 97.50, might be a place where aggressive players might take a fresh short side position.