US dollar purge continues but still waiting for a Euro breakout

Quick Recap

The forces against the US dollar are building. The Aussie was the first asset to break out of the down trend and it has now been joined by gold and the Kiwi. The Euro and Canadian dollar are very close to a break as is the Yen.  USDSGD looks like it is ready to break down also.

CFTC data released over the weekend showed that US dollar longs built in the week to last Tuesday. Even though a lot of water, trading and profits have gone under the bridge since then the overall net long US dollar (net short everything else) is still huge.

So there is a lot of overhang and if, its an if, Euro can break 1.1050 it will be on for young and old.

On stock markets Europe was of over greek concerns. But even though Angela Merkel is Germany’s good cop she still always sounds as though she wants to help Greece get through this and keep the Union together. We’re getting close to the next deadline,  which is now only weeks away, so keep an eye on Greece.

There was some other interesting things last night with US Fed Vice Chair Stanley Fischer saying rates will rise this year but that the path of interest rates would not be linear. That’s a recognition that the fed recognises the enduring fragility of the wider economy and plays into the Dolla bears hands. In Europe Draghi’s comments that low rates were starting to work in Europe also helps the Euro at the moment.

We covered Asian stocks and why China ran so hard yesterday afternoon but traders on the ASX are clearly watching the overhead resistance and are, for the moment, reluctant to take it through.

On the day

There is nothing big in Australia or around the globe today/tonight.

And here’s the overnight Scoreboard (8.20 am AEDT):

• Dow Jones down 0.06% to 18,116
• Nasdaq down 0.31% to 5,010
• S&P down 0.17% to 2,104
• London (FTSE 100) up 0.22% 7,037!!!
• Frankfurt (DAX) down 1.19% to 11,895
• Paris (CAC) down 0.65% to 5,054
• Tokyo (Nikkei) not bother by the Yens strength, up 0.99% to 19,754
• Shanghai (Composite) Boom again! up 1.95% to 3,687
• Hong Kong (Hang Seng) up 0.49% to 24,494
• ASX Futures (SPI June) down 2 to 5,954
• AUDUSD: 0.7875
• EURUSD: 1.0945
• USDJPY: 119.69
• GBPUSD: 1.4950
• USDCAD: 1.2519
• Crude: $49.03
• Gold: $1,189

CHART OF THE DAY:

EURUSD: This is the canary in the US dollar coal mine. If the Euro can break up and through 1.1050 then 1.1250/60 becomes the target. I’m going to take 50% of long off the table as Euro approaches 1.1050. 

AUDUSD: yesterday I said “Solid price action and a strong weekly close confirm the Aussie is on target for a run at 79 cents.” We had that test last night with a high of 0.78975. Staying long though – for the moment.