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ASPRAY'S GLOBAL TRADER
Dollar Drops On More Inflation Fears
Talk Of German Rate Hike Fueled By Data
The markets are reported as of the close Thursday.
The dollar attempted to hold above the recent lows until the latter part of the NY session as the decline picked up steam. A sharp jump in Germany's imported good prices and talk from the Bundesbank about tightening hit the dollar hard. Though some of the daily studies are trying to bottom, the dollar needs to rally to indicate that the decline is over. The dollar has also been weak versus the SWF.
After the sharp drop early in the week the dollar has held up well versus the yen.
DEUTSCHEMARK/U.S. DOLLAR: The dollar violated the support in the 1.7660 area on the second test and hit the 1.7600 area. The next key support is at 1.7520-50 which corresponds to the overall 61.8% retracement support. There is additional chart support at the 1.7400 area. First resistance now at 1.7660-7700 with more important in the 1.7800 area. The APMosc is still negative at —31 but has formed higher lows.
Summary–Traders went 25% long at 1.7682-7728, stopped at 1.7637. No new recommendation for now.
DEUTSCHEMARK/YEN: The DMK/yen was able to rally in impressive fashion in NY trading as the dollar dropped versus the DMK. The recent highs and the resistance at 69 has been reached. The daily studies still look toppy. Traders went 25% short at 68.05-68.30, stopped out at 68.43.
Dollar Holding Firm Against Yen
The dollar has acted well versus the yen after the sharp drop early Tuesday which cleaned out most of the long dollar positions. We are still not convinced that the dollar's correction is over. A break back below 120 should signal a decline towards 118-118.50 if not the daily uptrend in the 117 area.
The daily studies are slightly negative overall as the APMosc has formed lower highs. It is slightly negative at —4. The dollar has resistance now at 121.40-60 and more important in the 122 area.
Summary–No current position.
STERLING/YEN: The STG/yen has been very volatile as it rallied over 3 yen today to the 197+ area but has dropped sharply early Friday. Still prefer the sidelines as the ranges make risk control difficult.
SWISS FRANC/YEN: The cross was able to push back above the 83 level as it reached the 83.50-70 area in early Friday trading. Most of the daily studies are diverging but a top has not been confirmed yet. Traders were 25% short at 82.62-94, stopped at 83.34.
STG And Crosses Test Stronger Resistance
The STG had an impressive rally up to the 1.6300 area but then plunged early Friday. It briefly hit 1.6140 on comments about pegging the STG to 1.6000. The cable has rebounded but it may take some time for the technical damage to be overcome. We still have no position as the next few days will be important.
STERLING/DEUTSCHEMARK: The cross did rally impressively back to the 2.8800 level today which suggested that the uptrend had resumed. The cross has plunged along with the STG as the 2.8400 level was briefly broken. Traders went 25% long at 2.8644-8700, stopped at 2.8537. No position.
STERLING/SWISS FRANC: The cross tested the 2.3700 level but has broken back below 2.3400 early Friday. A further decline is possible over the next few days and would stay on the sidelines for now.
Dollar Break Support Versus Swiss Franc
The dollar was also weak versus the SWF as the support in the 1.4540-60 area was broken. Next support at 1.4400-50 with additional in the 1.4300-50 area. The dollar needs to move above the resistance at 1.4600-50 to suggest that the dollar's decline is over. Traders were 25% long at 1.4642-88, stopped out at 1.4577. No position.
DEUTSCHEMARK/SWISS FRANC: The cross is still range bound with no imminent signs of a breakout. The technical formation still favors a break to the downside with key support in the 0.8170 area. A break below this level could be sold with a stop above 0.8250 initially.
CANADIAN DOLLAR: The dollar continued to move lower today versus the Canadian Dollar as the break in support at 1.3860-70 was significant. Next good support in the 1.3780-3800 area. The downtrend is now in the 1.3900 area.
The daily studies are negative and show no signs yet of bottoming.
Summary–No current position.
Bonds Reverse On Strong Durable
Goods Data–Stocks Also Lower
Bonds dropped in early NY trading on the stronger than expected durable goods numbers. They closed near the lows. This weakness after the previous sharp rally is a short term negative. To keep the bonds' uptrend intact the dollar needs to rebound sharply in the next few days.
Summary–Traders were 25% long at 11514-21, stopped out at 11511.
U.S. STOCK MARKET: The market was hit again today as after testing the 8000 level just two days ago it is now 150 points lower. Next support at 7800 with stronger at 7650-7700. A weak bounce back to the 7950 area will be more negative.
September 26, 1997Thomas E. Aspray
APM Asset Management
P.O. Box 15366, Little Rock, Arkansas
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