06June Days like this test our mettle, but we are holding to it for now. Today’s highly correlated action accelerated the recent reversal of our Rate of Change indicators and did successfully pull some of our Momentum indicators along with more seemingly on the way. However, any turns like this since the wintertime have been short lived and essentially resulted in consolidation and a gathering of potential energy for a continuation of the larger move. The “Fedspeak” really ramps up tonight and tomorrow, where focus will surely turn to any hints at more stimulus in the U.S. We tend to feel the Fed will be forced into another round of QE as pressures mount. Unfortunately, we will be hostage to the headlines once again… Currencies: 06June More hints at intervention and accommodation has eased the Overbought US Dollar conditions. Volumes were stronger, but not explosive.
Our rising Rate of Change indicators have flipped many of our Momentum to a more US Dollar negative dynamic. This should be watched closely. Additionally, we are back at the mercy of the headlines with events in Europe unfolding at a rapid pace and the FOMC meeting on 20June. In the interim, there will be plenty of opportunity for them to telegraph their next move.

Aussie: 06June Aussie GDP more than doubled expectations:
http://online.wsj.com/mdc/public/page/2_3063-globalEconom......
The bottoming action we have been noting seems to be taking hold That said, as we noted yesterday, the last time we saw a positive turn in our Momentum indicator, in mid April, the currency essentially consolidated with a modest upward bias before another substantial leg to the downside. Keep an eye on our Rate of Change for signs when/if this may be happening again.
Today’s rally has taken the market above the falling channel that has been in place since 30Apr and above the previous highs (0.9885), which is near near the 5/15 low and the 5/21 high. A sustained move higher targets the 38.2% retracement (1.0005) of the Mar-May decline. Old support from mid April (1.0142) should offer new resistance and also aligns with a 50% retracement.
The recent lows lie in a zone that traces back to support from last November. Our noted bear flag formation from last week is losing some of its luster on some sloppy chart action. If it the pattern reinstates itself, look for a sustained move lower on stronger Volume to break this major support area and target the 0.9000 level.
Seasonal Snapshot (cash): The 5-year pattern’s upward bias extends until the end of July.
The 15&30yr patterns chop much higher until 20June, and then both fall out of bed throughout the rest of the month.