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In a twist to the usual cliche, the US central bank’s policy-makers may demonstrate this week that more than ever, they are caught between a rock and a ’soft’ place.

And if, indeed, we end this week with more confirmation of a wait-and-see stance on their part, the most vulnerable currencies could once again prove to be the greenback’s non-Asian counterparts.

Based on the week’s tech signals from our charts at least, we are talking in particular about erstwhile safe refuge alternatives like the euro, Swiss franc, gold and the yen - as well as the high-yielding New Zealand dollar.

Gold, for example, was one of the week’s largest losers, retreating almost 4 per cent. The euro did record a fresh US$1.60 high, but then reversed course rather sharply too - hurt as well by a nasty-looking German business sentiment report, rumours of fresh losses for its banks, and a reversal of hawkish ECB remarks.

On the other hand, as highlighted here last week, the greenback’s more favoured Asian alternatives - like the Chinese yuan, Singapore dollar and Malaysian ringgit - have continued to look far more resilient.

Although the greenback has bounced back close to 3 per cent versus the Swiss franc (recall our breakout signal at 1.02 francs last week), it has failed to make any headway versus the Chinese yuan and has rebounded less than one per cent in Singapore dollar terms.

In the bigger picture, however, shorter-term sentiment has certainly swung in favour of the US dollar over the past week, with a broader-based US dollar index recovering almost 2 per cent.

This, in turn, has been mostly credited to a growing belief that the US central bank’s policy-makers are expected to hint this week that they want to take a step back - after cutting rates by another expected 0.25 per cent.

Caught between rock-solid commodity prices (the rock) and a US economy which may already be in recession (the soft place), a good number of Fed-watchers believe that it now wants to see the effects of past cuts and imminent fiscal initiatives work their way through to end-users before acting again.

Starting this week, the US Treasury is also scheduled to send out tax rebate cheques that will eventually total a massive US$117 billion.

And just to make policy decisions more complicated for the Fed and financial markets, America’s second-richest man - the highly respected Warren Buffet - warned this week that the US recession may prove ‘longer and deeper’ than most expect, notwithstanding the fact that real US interest rates have now slipped into negative territory.

But in the event we do see some fortuitous assistance for the greenback from the data front this week, the most important of which is April US jobs due for release this Friday, here’s a chart-based update for the US dollar’s most soft-looking counterparts at the moment.

Versus the Swiss franc and Japanese potential, our charts allow the American currency to consider further upside advances towards ultimate objectives which may be as ambitious as 1.05 francs and even 110 yen.

The euro, meanwhile, faces heavy chart pressure on at least two fronts, based on our charts.

Yesterday, it plunged through the base of a bearish descending triangle formation to hit two-month lows versus the Singapore dollar too.

More losses threaten - perhaps all the way down to S$2.08 - if the euro cannot quickly recover above the S$2.12 - S$2.13 area.

And against the normally unpopular pound, the euro was starting to face down a possible test of important support in the region of 78.5 pence as well.

The New Zealand dollar, too, is in all kinds of trouble.

For a start, it’s coming dangerously close to our key support level in the region of 77.5 US cents.

The Australian dollar, meanwhile, has scaled five-month highs of NZ$1.20, and looks like it wants to make a run for NZ$1.25.

And, closer to home, S$1.02 lows threaten if it cannot quickly recover above S$1.06.

Source : Business Times - 30 Apr 2008