USD: The Dollar continues to build upon yesterday afternoon’s turnaround, and is now back within striking distance of reaching new high ground by the close of this week’s trading. Comments by San Francisco Fed President Williams that the Fed may reduce their current bond buying over the next few months carried plenty of weight in the market, as he became the second major Fed official this week to support “tapering” of their QE measures. The Dollar appeared ready to have a sizable pullback after receiving few positive economic data points over the past two sessions, but these Fed comments have now put a sharp contrast between the US and other major global economies. This morning’s US economic numbers may have lost a portion of their potential impact in the wake of yesterday’s Fed comments, but a positive reception for a private survey of Consumer Sentiment may be the catalyst for the Dollar reaching new 9-month highs later this morning. The Dollar will start out this morning with a near-term upside target of 84.15, and is likely to remain fairly well supported as long as prospects for Fed tapering are not dampened by fresh official comments through the end of this week’s trading.
EUR: The June Euro has found little lasting support during the past 12 hours, but was able to avoid taking out the lows of the previous two sessions early in this morning’s trading. The prospects for follow-through ECB easing after this month’s rate cut is keeping the Euro on the defensive this morning, particularly with this week’s sluggish Euro zone GDP readings still shadowing the market. There are several key ECB officials that will be speaking during the next few hours, so any fresh comments on negative deposit rates or the Euro still being “too strong” will likely fuel additional downside momentum going into the weekend. Stronger demand and lower yields for peripheral EU debt have provided support, but the Euro clearly needs to see signs of economic improvement
outside of Germany in order to fully shake off this current pressure. The June Euro will find support around the 128.45 weekly low during today’s session, but is likely to finish out this week firmly rooted to the lower end of this current downdraft.
GBP: The June Pound remains under significant pressure, but so far has stayed well clear of the recent lows this morning. While carryover pressure from the Euro zone has weighed heavily on the Pound recently, a positive reception for the Bank of England’s Quarterly Inflation Report as well as recent improvement with UK economic data should provide strong underlying support. With the BOE unlikely to start up fresh easing measures over the next few months, the Pound is likely to be a major beneficiary if global risk sentiment can turn around going into the weekend. The June Pound will find near-term support around the 152.20 level this morning, and should avoid a retest of the weekly lows as long as risk appetites do not turn sour going into the weekend.
JPY: The June Yen once again found a brief period of strength during Asian trading hours, then fell squarely back on the defensive coming into this morning’s trading. A much better than expected reading for Japanese Machinery Orders provided little in the way of longer-term support, as the Bank of Japan’s aggressive easing measures are unlikely to let up until inflation readings start to show positive readings, much less reach their 2% target rate. The recent surge in JGB yields may have helped to keep the Yen from dropping sharply through the 97.50 level this week, but the chances for a full-scale recovery are slim unless there are signs that Japanese officials are becoming more concerned with the Yen’s rate of descent. Slack US data may provide the Yen with a near-term boost of safe-haven support, but the longer-term downtrend will remain firmly intact going forward. While the June Yen is likely to retest the 97.32 low for the move later this morning, we would still wait for a rebound back towards the 98.26 area before approaching the short side of the market using long put option strategies.
CHF: The June Swiss was able to put together a sizable recovery from overnight lows, but continues to be weighed down by carryover pressure from the Euro zone this morning. The negative shift in recent Swiss economic data will make it difficult for the Swiss Franc to sustain any upside momentum through the end of this week, as the SNB is likely to keep their current 1.20 floor rate with the Euro firmly in place for the foreseeable future. The June Swiss may slide back towards the 103.36 level later in today’s session, and will need to find stronger risk sentiment from Europe and around the globe in order to recover any large portion of recent losses.
CAD: The June Canadian continues to drop further into new low ground this morning, and at this point is more than 2 cents below last week’s highs. Although the Canadian Dollar has been weakened by sluggish commodity risk sentiment this week, a strong reading for today’s Canadian inflation data could be the catalyst for a late-week short-covering rally. The June Canadian will find support around the 97.38 level early in today’s trading, and stands a good chance for a large recovery if data on both sides of the US/Canada border can exceed market expectations.