Marc Chandler | Mar 30, 2014 12:12AM ET
Sterling: With the gains in the second half of last week, sterling has recovered 50% of this month's losses after being rebuffed near $1.68 on March 7. Technical indicators, like the RSI and MACDs, are constructive. A move above $1.6660 could signal another run at the $1.68 cap. Support is now pegged near $1.6600 and then $1.6550.
The Canadian dollar: The loonie has been the weakest of the major currencies this here in Q1, losing about 3.85% against the dollar. This is after it rallied about 1.6% in the past week, to eclipse theNew Zealand dollar as the second strongest behind the Australian dollar. Encouraged by a recovery in retail sales and the lack of fresh deterioration in Canada's CPI, a short-covering rally in the Canadian dollar saw the greenback test CAD1.10. Technical indicators are still somewhat supportive of the US dollar, and the real test may come on a bounce to CAD1.11. Quebec's general election (April 7) and Canada 's employment data (April 4), at the same time as US jobs report pose event risk.
Early last week it broke above its 200-day moving average (~$0.9140) and has not looked back. It also moved surpassed the 50% retracement of the decline from the late October high near $0.9760. The next target is near $0.9330.
Mexican peso: The chase for yields helped lift the Mexican peso to its best level since mid-January. However, after slipped below MXN13.05, the dollar rebounded and finished the session near the highs. If this does not mark a near-term bottom for the dollar, it probably came close. Our reading of the technical indicators warns of a risk of a move back into the MXN13.15-MXN13.20 in the days ahead.
Observations based on the speculative positioning in the CME currency futures:
1. Most position adjustments were minor in the reporting week ending March 25. which may be surprising since it covered the FOMC meeting and BBK President Weidmann suggesting that, if needed and conducted properly, he could support QE. Of the 14 gross positions we track, all but four were changed by less than 4k contracts.
2. The Canadian dollar account for half of the four notable adjustments. Gross longs rose 12.7k, which is about 33% increase. Gross shorts were culled by almost 24k contracts, which is nearly a quarter. Euro longs were cut by nearly 11k to 107k contracts. Long yen positions were cut by a quarter to 17.6k contracts.
3. The recent price action shows divergent US dollar performance. The greenback is doing a bit better against the euro (and Swiss franc) and less well against the dollar bloc. This is reflected in speculative positioning. The euro and yen saw longs cut and shorts increase. The dollar-bloc was the opposite: gross long Australian and Canadian grew and shorts were reduced. Over the past week, sterling was the best performer outside of the dollar-bloc. In the futures market, the gross long sterling position rose and the shorts fell.
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