June US Dollar: Given the gains in the dollar index this week, it is clear that some measure of improved economic expectation is being factored into the greenback. In fact, expectations for a slightly hotter than expected CPI and noted strength in retail sales is more than likely going to offset a modest dip in the University of Michigan survey of consumer sentiment that will be released later today. Given the 150 point rally in the dollar index this week and the prospect of an extension following the first set of US scheduled data today, we wouldn’t be surprised to see a test of the 50 day moving average up at parity (1.00). However with the dollar closing in on a significant downtrend channel resistance line we will probably be recommending long dollar index put plays at some point next week.
June Euro: The market all but discounted improved EU economic forecasts earlier this week and it has also discounted a series of better than expected economic forecasts over the last week. Unfortunately, for the bull camp in the euro, the euro zone March industrial output showed a contraction this morning off of estimates calling for a +.4% gain and that could leave the euro vulnerable to any fresh strength in the dollar. While we doubt today’s US scheduled data will result in a pummeling of the euro, we continue to see a critical pivot point support level down at 10840, which is the top of an old gap forged back in late April. We can’t rule out a possible re-test of the 50 day moving average next week which should come in around the 10825 level.