Dollar Poised for Significant Loss

CURRENCY FUTURES

DOLLAR: The technical bias in the dollar remains down with the index violating psychological support today at 103.00, with the fundamental bias also favoring the bear camp from an ongoing pattern of soft US data which is likely to continue today. According to Reuters the dollar is poised for the biggest monthly loss in a year with today’s data unlikely to shift sentiment away from the bear camp.

$100 bill

OTHER CURRENCIES:

While the trade is highly suspicious of the ECB’s ability to hike rates, comments from bank officials indicating the possible need to hike rates further should give the euro an edge over the dollar. However, the euro should be underpinned by ECB comments currently ruling out a rate cut next year. Fortunately for the bull camp in the euro, economic data overnight produced minimally supportive information with German Gfk Consumer Confidence Survey readings remaining deep in contraction territory but slightly improved from the previous month.

The euro should also derive support from a surprise improvement in French Consumer Confidence readings for November.

The pound continues to be our pick for the strongest currency with the charts favoring that view and further interest in the pound derived from a 5.6% year-over-year gain in cyber weekend spending. The pound is also supported following comments from the Prime Minister touting increased foreign investment flow into the UK.

In conclusion, the dollar remains out-of-favor and more declines are expected with the Canadian likely to be the strongest, followed by the pound and then by the euro.

INTEREST RATE MARKET FUTURES

We leave the edge with the bull camp as yesterday’s new home sales were softer than expected, there was ongoing contraction in the Dallas Fed manufacturing business index. In fact, the potential for more technical short covering gains is high, with fresh long entry pricing down at an uptrend channel support line down at 114-25 in December bonds not likely to materialize today.

STOCK INDEX FUTURES

Global equity markets overnight were generally mixed with a very slight edge for the markets trading lower. However, the most active mainstream markets were lower throughout Europe and the US market started out slightly softer. While there continues to be a positive “buzz” regarding holiday sales and estimates of $12 billion spent online yesterday, the charts displayed a loss of bullish momentum with a developing pattern of lower highs and lower lows.

 

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