Currencies: 17May See the Yen for analysis on today’s spike to the upside.
That said, we still maintain that Greece’s ongoing political turmoil has many commentators we’re hearing expecting Greece to leave the Euro. This uncertainty continues to drive capital into an extremely Overbought US Dollar. The “risk off” pressure to most of the major currencies is becoming a chronic dynamic of new lows and extreme Oversold conditions.
Watch for an announcement or “event” that reverses this dynamic (if only for a while) into a profit-taking US Dollar decline.
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: 17MayWe maintain the validity of the comment we made recently about a bearish flag follow through: With indications of slowing economic activity in Asia, the Aussie is likely to remain under some pressure.
Longer term, it appears the Aussie may be looking at another material move lower. There is the break below the bear-flag in chart action and the 200-day moving average has rolled negative.
If the break below off the bear-flag plays out, classic analysis calls for a move of approximately .0600 points lower from near the break out point of 1.0240-1.0250. This would target somewhere in the area of 0.9650. This is very near the lows from 11/22/2012.
Volatility remains in the low average range and falling.
Lower lows point to a continuing bearish trend. Today’s high in the June contract is one tick below yesterday’s… a lower high by a hair.
Our technicals are very bearish across the board and the currency is in extreme Oversold territory (13). We continue to note that the action is still hugging the -2 STD (0.9829) below the 21-day moving average (1.0157).
Support is still seen at .9875, where is held in overnight trading before breaking down. Below that is the .9850 round number psychological level and then yesterday’s lows at .9838.
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.
Resistance is seen at 0.9935, a double top from the last two sessions.
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: 17May Words of warning from U.K. Prime Minister about European debt contagion and his intentions to stick with austerity plans is keeping the Sterling on its heels:
http://www.bloomberg.com/news/2012-05-16/cameron-to-say-h......
The currency has retaken the now falling 200-day moving average (1.5820) after a probe below earlier this morning.
Since the Pound peaked on 4/30, it has been under relentless pressure, recently breaking out below the declining channel. The lower bound of that channel, near 1.6000, should be seen as a resistance level. Below that, 1.5950 is another resistance. The market tested near there in overnight action and once it fell to the lows, failed there this morning.
More weakness targets the 12Mar low (1.5601), but it may take a period of consolidation before it is reached… look for a bear flag or pennant formation with declining Volume.
Our technicals remain quite negatively biased, but be on guard against our Oversold and falling indicator (13). Volatility is Low but rising
Seasonal Snapshot (cash): All three patterns have a quite negative bias until the end of May.
Canadian : 17May Much like the Aussie$, its “commodity currency” counterpart, the Loonie is in an extreme Oversold (14) race to the downside.
The falling 200-day moving average (99.40) and falling trend line old support going all the way back to January should offer new resistance.
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.
April Canadian CPI is on deck tomorrow morning.
This market is also now pressuring the –3 STD below the 21-day moving average as our Bollinger Bands expand in wild fashion.
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: 17May We still assert that the DX ascent rate is likely becoming unsustainable as the chart action looks to be going parabolic.Don’t be surprised if a near-term correction occurs. Our technicals are all pointing higher, but the Overbought level is extremely high at 97 as of this writing.
Trading is now in the area the market peaked back in mid-January. Resistance would be all the way up to 82.00, the upper bound of that same trading area.
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: 17May More negative news, and more negative technical dynamics despite the near unchanged level as of this writing. Since failing to breach the 1.3300 resistance during the May Day holiday on 5/1, this market has been under relentless pressure.
The Euro has now fallen through all of our identified support levels. Currently, it has probed to new lows below the 1.2700 level, held and rebounded into the mid-January congestion area. The support level will again be 1.2700,and then below that to 1.2625, near the January lows. Resistance lies above near 1.2800. This is both a psychological level and an area that offered resistance back in January.
Of note, this market is extremely Oversold at 4. If some sort of “deal” is trotted out to “fix” the issues at hand, a material bounce may be in the cards.
The Greek political impasse continues to dominate the Euro’s news dynamics. As we stated last Thursday, the Euro has and probably will probably remain under pressure so long as the political crises continue to roil the Euro-zone.
Greece is the current issue at hand, but what happens when Spain or Italy ends up in the spotlight?
Seasonal Snapshot: The 5&15yr patterns consolidate and the 30yr pushes lower until the end of June.
Yen: 17May Yesterday’s Hammer Candlestick formation tested and held above support in the low 12400s. Support should be offered in this area going forward.
A better than expected GDP (+1.0% vs. +0.8% expected with a 0.2% upward revision to the previous quarter) squirted the Yen up through last week’s highs (1.2595). The high of the move so far tested rising trend line resistance (1.2640) that extends back the 01May high. Steeper rising trend line resistance back to the bottoming action seen in mid March comes in at 1.2700. We are wary of any signs of BOJ intervention on this current spike, as it wants a weaker Yen to maintain the Japanese economy’s currency competitiveness.
Seasonal Snapshot: Modest weakness in all three patterns will turn positive for a week on 1May, then consolidation into the first part of June.
Disclaimer: A commodity and currency report brought to you by Providio Trading Consultants, Inc. There is risk in trading futures and options. One's financial suitability should be considered carefully before placing any trades. Past performance is not indicative of future results.
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