Overall: Thursday saw the biggest sign yet that the market simply does not want to hold dollars. Early this morning the majors dropped significantly after S&P downgraded the U.K. economic outlook. The announcement sent the dollar higher and S&P futures along with European markets lower. However, although European and U.S. equity markets closed lower, the dollar was unable to hold onto gains and closed the day lower, once again, across the board. Cable was the biggest mover of the day as the pound dropped after the announcement but strengthened and closed higher against the dollar. The market is building a massive short dollar base that will take months to complete. There will be opportunities for long dollar trades but only to the point of testing support.

U.S. initial unemployment claims came in higher than anticipated for last week but down from the previous read. The total number of unemployed persons receiving benefits rose to a record, a sign that the labor market continues to weaken. Claims fell by 12,000 to 631,000 last week. The total number of persons receiving unemployment benefits rose to 6,587,000. Manufacturing in the Philadelphia region contracted at the slowest pace in eight months in May. The Philadelphia Fed manufacturing index came in at -22.6, higher than the previous read of -24.4 but below analysts’ expectations of -18.9.  

The Euro (Eur/Usd) The euro moved higher again on Thursday as the dollar struggled in the broad market. The pair gained 100 pips, testing the 1.3900 level at the close. The European PMI numbers released this morning showed that both the service and manufacturing sides of the economy are still in a contraction phase. Services PMI came in at 44.7 while the manufacturing PMI came in at 40.5.
The Pound (Gbp/Usd) Cable traded in a huge 375 pip range after plunging 200 pips in 5 minutes during this morning’s European session after the announcement that S&P downgraded the U.K. economic outlook. However, after the strong move lower that took the pair below the 200 day simple moving average, the pound strengthened and closed the day with a gain of approximately 90 pips. 

The Aussie (Aud/Usd) The aussie also traded in a wide range on Thursday, erasing early losses and closing with a gain of 30 pips. The pair has gained each day this week but the moves higher have been a struggle. 0.7800 continues to be the level that needs to broken before we see a significant move to the upside. U.S. equities closed the day lower, which may have capped possible gains in the pair today, but gold prices moved higher by almost $20 an ounce.

The Cad (Usd/Cad) The Canadian dollar strengthened, once again, against its U.S. counterpart as the dollar continues to be out of favor with traders, but the cad’s moves lower were limited as oil prices fell back to the $61 a barrel level and equity markets closed the day lower. Canadian wholesale sales declined 0.6% to $40.5 billion in March.

The Swissy (Usd/Chf) The swissy moved lower again on Thursday, for the fourth straight day, as the dollar continues to weaken across the board. The pair lost approximately 60 pips and is now trading at the lowest level since January. There were no economic releases from Switzerland this morning since today was a Bank Holiday, and there are none scheduled for the rest of the week.
The Yen (Usd/Jpy) U.S. equity markets closed the day lower on Thursday and the Japanese yen strengthened against the dollar for the third straight day. The pair lost approximately 50 pips, which was off the lows of the day as the pair managed to break the 93.00 level intraday. Activity in the pair may be limited during the Asian session as traders await the BOJ to announce its decision on interest rates and the BOJ press conference early tomorrow morning.