We had anticipated the dollar would be under pressure
in the first part of the week. Today’s losses are coming despite
slightly wider US 2-year premiums. Position adjusting seems to be the
main factor, but it is not immediately clear if it is ahead of the ADP jobs
estimate and FOMC meeting tomorrow or the US election. Trump’s support
had bottomed before the FBI re-opened the investigation into Clinton’s emails,
and his support appears to be continuing to edge higher.
view that the Dollar Index snapped a three-week advance last week.
We identified initial support in the 98.00-98.20 area and warned that a break could see 97.60. Today’s low
thus far is 97.74. The Dollar Index has fallen through the 20-day moving
average for the first time in a month. A break of the 97.60 area would
suggest a deeper correction is in store
that could carry it toward 96.75.
The euro recorded a seven-month low on October
25 near $1.0850. It reached nearly $1.1065 today, which is the best
level since October 12. We had foreseen potential toward
$1.1030-$1.1040. Today’s high meets 50% retracment of the slide since the
September 26 high near $1.1280. The 61.8% retracement of that move is
found by $1.1115.
We had envisioned the dollar to test the
JPY104 area, and that is also where the 20-day moving average is found. Our idea that a break of
JPY104.00 could spur a move toward JPY103.20 still seems reasonable.
Recall that unlike the euro (and sterling) speculators in the CME futures are net long yen.
Sterling extended
yesterday‘s gains recorded as Carney announced his intentions on stay at
his post until mid-2019. It has taken out last week’s highs
(~$1.2270) by a handful of ticks, but sellers appeared to re-emerge near the
20-day average (~$1.2285). It does not appear to be going
anywhere quickly. Support is seen
ahead of $1.22.
The Australian dollar approached the $0.7700
cap on the back of the less than dovish central bank statement and rising
copper prices. However as the ceiling
was approached, sellers emerged and
knocked the Aussie back to the middle of the session’s range. Look for
buyers to make a stand in the $0.7620-$0.7640 area.
The Canadian dollar’s firmness seems to be
more a reflection of US dollar weakness than something positive about the
Loonie. It has been confined to
yesterday’s ranges. For the third time in as many sessions, the US dollar
has been able to sustain gains above CAD1.34. The market looks like it
wants to try again.
We had cautioned that the S&P 500 looked
vulnerable. Anticipating that the October low near 2114 could be
taken out, we suggested near-term potential toward 2100. Given the
momentum, we now suspect it could fall a bit further, maybe toward 2090 before
bottom pickers show their hand.
Oil looked bearish to us, and even with the
heavier dollar today, oil has struggled to find a bid. The December
light sweet crude oil contract is sitting on one-month
lows ahead of $46.30 A trendline connecting the early-August and
mid-September lows comes in a little below $46 for the next couple of sessions
and $45.65 is the 61.8% retracement of the rally since those August lows
(~$41.60).