Waiting on Japanese Data, the Yen is Up for Now

The yen is the strongest of the major currencies.  It has gained about 0.65% against the dollar.  It has been grinding lower throughout the Asian and European session and has remained in narrow ranges near its highs in the US morning.

Japan still seems isolated in terms of it desire to intervene.  Ahead of the G7 heads of state summit this coming, the risk of intervention remains slight.  Asian and European shares were lower, which favors the yen.  US yields are flat, while the US 10-year premium has narrowed a couple of basis points.

The Dollar Index has been Up for Five Weeks

The US dollar continued the recovery begun May 3 and rose against most of the major currencies over the past week.  A nearly 3.5% rally in oil prices, the fifth weekly gain in the past six weeks (a $9.5 advance over the period), helped the Norwegian krone turn in a steady performance.  The Canadian dollar's 0.2% decline put it in second place. 

Currency Cautiousness Creeping in ahead of Next G7 Meeting

The Japanese yen is recovering from two-day two percent decline.  The yen is the strongest of the majors today, rising about 0.6%.  The greenback initially extended its gains marginally in early Tokyo before the selling pressure emerging.  The price action reinforces the importance of the JPY109.50 resistance area. 

Has the Dollar Entered a New, Bullish Phase?

Sometimes the mountain looks clearer from the plain the summit to paraphrase an American-Lebanese poet.  The dollar appears to have entered a new phase on May 3.  On that day, it reversed higher against the euro, yen, and sterling for lows not seen in a while.   

How About That Loonie, eh?

It has been painful trying to pick a bottom of the US dollar against the Canadian dollar.  Now a 4-5 point downtrend from the secondary high in late-January is being violated today.  It is found near CAD1.2785 today.  Intraday penetration is one thing, but some models may take the signal on a closing basis only. 

The US dollar recorded the multi-year high against the Canadian dollar on January 20 a little below CAD1.47.  Since then the Canadian dollar has been the strongest of the majors, appreciating 13.3%, while the Japanese yen has risen 9.7%.

Holding on to the Dollar's Null Hypothesis

In quiet turnover, with China, Hong Kong, Singapore and London markets closed, the US dollar is trading with a heavier bias against all the major currencies.  Lower commodity prices, including oil and copper, appears to be taking a toll on some emerging market currencies, including the South African rand. 

Bailing at the Bottom?

Speculators in the futures market continued to press a bearish view of the US dollar the CFTC reporting week ending April 19.  According to the Commitment of Traders report, speculators added to their gross long currency futures position in seven of the eight currencies we track. The exception was the British pound, where speculators liquidated a minor 1.1k contracts, leaving them with 32.8k gross long sterling future contracts.

Are the Canadian and Australian Dollars Overextended?

The US dollar turned in a mixed performance last week, which given the softer than expected inflation, retail sales data, and industrial output figures, coupled with the poor technical backdrop, could be a signal that its decline in recent months has run its course.  

Does China Understand the SDR's Function?

At the IMF/World Bank meetings this week, Chinese officials are again pushing for greater use of the IMF's unit of account, Special Drawing Rights.  It is China's turn as the rotating host of the G20, which gives it greater influence over its agenda.  For its part, the IMF is concerned about global financial stability and must be open-minded.  It wants to strengthen the financial system.  It is only prudent to examine all reform ideas.