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Strategies & Market Trends : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: RockyBalboa who wrote (21142)	7/2/2009 8:50:36 AM
From: Slumdog	Read Replies (1) \| Respond to of 71423

BMO Capital Markets This AM's FX outlook......... What a change 24 hours make. Yesterday the USD was pressured across the board initially after the Fed’s Yellen (a noted rate dove) said that leaving US rates near zero for the next several years was “not outside the realm of possibility”, warning that the US has a “serious recession” and that if rates “were not at zero, we would be lowering rates more”. It would be fair to say that she went far beyond what has been said recently by other Fed officials, who have been more opaque in suggesting that rates are likely to stay at low levels for an extended time. Adding to pressure was a midday headline suggesting that China had asked for the upcoming G8 summit to discuss the issue of a new global reserve currency. Coming in this morning the USD index is up about 0.5% from yesterday close with the USD outperforming all of the majors. The firmer tone coming after China’s Vice Foreign Minister poured cold water on the earlier headline, stating that he had not heard of the request for reserve currency debate and that the USD remains the global reserve currency. That said, he did add hopes for reserve currency diversification in the future. In addition the USD is getting some support from a an unexpected rate cut from the Riksbank and much worse than expected trade data out of Australia and weaker construction PMI numbers in the UK as well as verbal intervention form the SNB. Elsewhere the ECB left rates unchanged 1% this morning, but that was expected given that the recent long term repo was seen as essentially a quantitative ease. Turning to North America, with the US closed tomorrow the calendar is fairly full with the market getting the US June non farm payrolls, May factory orders and the weekly initial claims. As for the employment data, the market consensus is calling for job losses of 365K, with BMO Economics looking for losses of 300K. There is no clear consensus on the whisper number after the Challenger layoffs number was better than expected while the ADP employment data was worse than expected. North of the border there are no data releases. As for the currency, USDCAD remains in the midst of recent ranges, although more importantly, although volumes were lighter than usual, yesterday the pair posted an outside reversal day, which could signal that the pair is about to resume its test of the downside. Off the daily charts the momentum indicators are still pushing the pair lower although the MACD has started to converge suggesting that the pair should / could see some consolidation first. To the topside, the market is still likely to find better longer term selling interest on any moves back towards the 1.1625/50 area. To the downside, the market should find good initial support ahead of the 1.1460/65 area which coincides with both the 50 day MA and bottom of the 9 day Bollinger bands. A break and close below there should open the pair to an extension lower towards the 1.1250/75 area.