Daily Spot: Currencies
A weekly summary of one complex, including daily updates of other developments elsewhere.[pay]
Dollar Basket Dec (DXZ) Thursday’s drop retraced more than 61.8% of the three-day rally, deeper than simply a correction. This kept alive the potential for probing the range’s lower-end and testing 76.65 to form a more durable bottom. Friday and Monday’s action has hesitated to extend down.
The Euro is also hesitating, although the Yen has probed a fresh high. The Yen’s fresh high is not being rejected, suggesting another higher high to come. In this context, the Dollar could squeeze in one more dip, before squeezing out shorts to trigger a rally.
This week’s election results and FOMC guidance on so-called QE2 measures will prove either that the current ranging is reversal pattern, or else it is a continuation pattern – either a turning point, or else a pause on the way to further extremes.
Gold Dec (GCZ) Potential to 1366.00 was realized Sunday night, and Monday’s close was negative vs. Friday’s close. The retracement has room down to 1342.00 before signaling that sellers are gaining traction for larger downleg. Holding a test of 1342.00 as support would enable filling the gap back up to 1372.00, which doesn’t otherwise require it.
30-year Treasury Dec (USZ) Friday’s bounce extended into Monday’s opening gap up, but the session soon turned down and closed negative. Thursday’s confirmation of Wednesday’s breakout close under 131’25 should now resume by producing fresh lows next targeting 128’14. It is interesting that Wednesday’s FOMC guidance on QE2 measures is so near, seemingly bullish for bonds. In that environment, beware of any quick reversal back above 131’25 that might threaten to invalidate the sell signal.
Crude Oil Nov (CLZ) Friday’s close under 81.50-81.55 was rejected by Monday’s open gapping up above Friday’s high. A two-week old gap back to 83.80 was filled, which wasn’t required. But it held, and the ranging persists.
Natural Gas Nov (NGZ) Potential to 4.17 was fulfilled overnight and then retraced sharply. The reaction down held 3.83-3.84 to retrace 61.8% of the rally from last Monday’s low. Closing any lower would have undermined the potential for another upleg, which now needs a little consolidation to absorb the shock to its system.
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Daily Spot coverage schedule is: Currencies (Mon), Metals (Tue), Energies (Wed), Rates (Thu), Softs (Fri, coming).