31 March 2008 - 17:51market commentary 3/31/08

Today we saw the euro test it’s prior high against the dollar and it totally failed. The violence of the move suggests very large positions were triggered at $1.59 as many player had surmised this to be a double top and $1.59 being the perfect price to short. I must say at this point EUR/USD does not look like it is heading past $1.59 anytime soon. Last night Japanese industrial production beat market expectations as I figured it would but the PMI hurt the yen against the dollar. Todays stronger than expected Chicago PMI helped the dollar’s cause a little to be sure but let’s remember that a reading below 50 still means contraction. Far more important was the release by the IMF which showed that central banks were still holding lots of dollars (they are about the only ones) and that reserves actauly grew with U.S. dollars staying at 64%. Meaning in the last quarter the number of dollars they hold went up. in the USD/JPY is flirting with parity at the moment and the Tankan report is about to be released. I think it will hold at 100 yen to the dollar for tonight though with a Tankan report helping the yen rally here.