Another weak day for the US dollar follows yesterday’s large breakdown. Lets look at the news and charts and see what targets lay ahead:
USDJPY breaks down out of a tight congestion zone – unless price immediately pulls back inside the wedge, the next major target is the 2005 lows.
USDCAD – having broken through a similar congestion zone, price is starting to accelerate. Canada’s strong commodity resource base continues to be cited as the principal reason underlying the strong Canadian $ performance, even in the face of a slower rate of interest rate hikes in that country.
EURUSD looks capable of retesting 2004 highs, and the measured move of the invest head and should in fact takes it somewhat beyond that level as a potential target. JPMorgan appears to believe so as well:
JPMorgan, the second-biggest U.S. bank by assets, forecasts the dollar will fall to a record $1.38 per euro by June 30, Patterson said.
GBPUSD very similar picture to the Euro.
U.S. Investment Income Trend Ominous for Dollar
NEW YORK (Reuters) – The ongoing decline U.S. net investment income suggests further weakness for the dollar lies ahead, analysts said. “I expect that will become a drag on the current account,” and the dollar, said Binky Chadha, global head of currency research at Deutsche Bank in New York. In the fourth quarter of 2003, the current account gap was 147.2 billion, 164.7 billion in the subsequent three quarters, according to the U.S. Commerce Department.
Over the same three month periods, net investment income flows into the United States shrunk from 13.6 billion, 6.7 billion.
“Unless there are significant changes to the patterns of global external imbalances, it’s perfectly reasonable to assume the U.S. income balance is headed toward deficit from here,” said Jason Bonanca, vice president of foreign exchange research at CSFB in New York.
UBS, JPMorgan, State Street Say U.S. Stock Sales Hurting Dollar
March 9 (Bloomberg)—UBS AG, JPMorgan Chase & Co. and State Street Bank & Trust Co. said information from clients show a ``strong’’ exodus from U.S. stocks that’s eroding demand for the dollar.
``The net equity outflow we’ve seen for the U.S. is a problem for the dollar,’’ said Michael Metcalfe, a senior strategist in London at State Street, the world’s largest provider of investment services to institutions. ``Strong U.S. growth expectations aren’t being reflected in investor flows.’’
Dollar Sell-Off Resumes, Deficits Blamed
“We think that the moves are driven by a renewed focus on U.S. imbalances in anticipation of U.S. trade data,” said HSBC analysts in a research note on Wednesday, referring to the euro’s rally.
Reminder: Trade data comes out this Friday.
US Dollar Index
This morning I snapped the US$ index daily and weekly charts – following any big break down the first thing we look for is either a “pause” or direct continuation. This morning a pause or relief rally in currencies seemed possible, however…
USD Index – as the day has worn on its clear that the Dollar is not getting support. Lows of 2004 are the next target – which is also the measured move and traditional target for a rising wedge – we’ve been pointing out this pattern for some time now.
The big picture:
Following the target immediately ahead, the next measured move, originally drawn out early 2004, takes price between 79 and 77. Its likely the decline will accelerate unless support is found at the multi year lows near 80, dead ahead.
05.03.09 13:39 #