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The Currency Futures Report

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Weaker Equities Increase Risk Aversion, Suppot Higher Dollar

Thu, May 14 2009, 06:30 GMT
by Bob Kozak

Alaron

Dollar Index (DXM9):

The DX opened higher at 82.60 and rose to a morning Hi of 82.85, as weaker equity markets retraced further after a lower Retail Sales report. Prices slid to a mid-day level of 82.39 and bounced into the afternoon session, ending the day-session at 82.63, up 21 tics. The s/t trend remains 'negative' w/ weak momentum indicators.Traders concerned with increasing their 'risk-avoidance' will key on the global equity market activity, which could support a higher Dollar. Shorts should tighten 'stops' or buy 'calls' to reduce exposure.
Thursday's weekly employment data may increase volatility early in the session. A higher open should find Resistance at 83.01 and 83.39, while an open below 82.49 may find Support at 82.11 and 81.59.

British Pound (BPM9):

Sterling opened lower at 1.5147 after comments from BoE Governor Mervin King stating the 'economy will face a slow recovery', following a downbeat BoE Inflation Report. Prices bounced to a mid-day level of 1.5210, before drifting lower into the close of 1.5168, down 103 tics. The s/t trend remains 'positive' w/ neutral momentum indicators. A slowing economy and an equity retracement could weigh on Sterling against a higher DX. Longs should tighten 'stops' or buy 'puts' to reduce exposure. A lower open may find Support at 1.5058 and 1.4947, while an open above 1.5194 should find Resistance at 1.5305 and 1.5441.

Euro Currency (ECM9):

The EC opened lower at 1.3632 after a weaker than expected Industrial Production report showing the biggest annual decline since 1986, down -20.2% y/y. Prices continued lower against the stronger DX, bouncing off our initial Support level of 1.3565 to a mid-day level of 1.3654, before heading lower towards the close, ending the day-session at 1.3607, down 30 tics. The s/t trend remains 'positive'w/firm momentum indicators. Weaker economic data and lower Q1 GDP may pressure lower prices, however, with a 'cap' on lowering rates and less quant-easing, the 'yield-gap' may support prices. Longs should tighten 'stops' or buy 'puts' to reduce exposure. Traders will key on the risk-appetite of traders for a key to DX direction. A lower open may find Support at 1.3540 and 1.3472, while an open above 1.3629 should find Resistance at 1.3697 and 1.3786.

Published on  Thu, May 14 2009, 06:34 GMT