Daily Spot: Currencies

A weekly summary of one complex, including daily updates of other developments elsewhere.[pay]

Dollar Basket Dec (DXZ) Monday’s action confirmed Wednesday’s ineffectual optimism was not bearish. It had only forecast a brief consolidation that would resolve up. Monday’s open gapped up and probed prior highs, hovering at highs into the close. And post-close action probed fresh highs.

Now that the consolidation has resolved up, it must avoid any other challenge to it. Any delay in extending the rally would be very vulnerable to sellers gaining traction. Sellers gaining traction at this stage of the pattern – that stage being a fresh resumption of the rally – would likely trend down sharply.

The bottom is becoming obvious. “QE2” is not having the expected impact, suggesting that its effects were already discounted, or it may be withdrawn. Regardless, the recovery should start to accelerate.

Gold Dec (GCZ) The drop was consolidated most of Monday before ending lower. Nex objective in-play is 1342.00-1338.00, so long 1381.00-1381.00 holds as resistance.

30-year Treasury Dec (USZ) The next objective as 126’00 was met, but at a trajectory so steep that an immediate bottom is unlikely. A bounce is possible, perhaps driven by a flight-to-quality during a stock market decline. But a bounce would be only temporary, and the decline is next targeting 124’16-124’20.

Crude Oil Nov (CLZ) Monday’s price action was essentially a non-event, mostly about absorbing the shock to the system of Friday’s steep decline before extending lower on the way to test 82.00.

Natural Gas Nov (NGZ) Reinstating the rally depends upon rejecting Friday’s drop to close above 3.93. Its recovery by Monday’s close would have been optimal, and at Tuesday’s open would suffice.

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Daily Spot coverage schedule is: Currencies (Mon), Metals (Tue), Energies (Wed), Rates (Thu), Softs (Fri, coming).