USD: The cross is finding moderate pressure in what have been calmer trading conditions than were seen over the past two sessions, and so far the Dollar has survived a retest of the initial post-Bernanke lows from Wednesday morning. While global markets are still some distance away from a “risk on” mood after this week’s Chinese PMI data, the Dollar is seeing little in the way of safe-haven support as flight to safety flows continue to cross the Pacific and head into the Yen. Comments this week by Fed officials have indicated that stronger US data, particularly on the inflation front, will be required before any tapering of Fed asset purchases will begin. Today’s always-volatile Durable Goods reading could provide the Dollar with a significant boost if that data can sharply exceed market expectations, but it may take something of the magnitude of next month’s Non-Farm Payroll number for the Dollar to fully regain upside momentum seen earlier this week. The Dollar may rally towards the 83.80 area with a positive read on today’s US data, but will likely head into the holiday weekend far below yesterday’s high for the move.
EURO: The June Euro was able to put together a sizable rally this morning, but has once again failed to climb through and above the key 130.00 level. Positive German economic news was the catalyst for this morning’s upside move, highlighted by an IFO survey that beat forecasts by a fairly wide margin. Even so, events in Asia are casting a long shadow over global markets and are keeping further Euro gains in check. While the Euro is likely to finish out the week with a positive tone, further strength needs to be seen from other “core” EU nations, much less the peripheral EU trouble-spots, before any extensive Euro recovery can hope to begin. The June Euro may slide back down towards the 129.62 area later this morning, but will finish out this week’s trading in better shape than when it started.
GBP: The June Pound remains subdued this morning and is showing little inclination to make a large extension to yesterday’s sizable rebound from 2-month lows. Comments by a BOE official against negative interest rates have provided some measure of support for the Pound, but not enough to fully overcome the lukewarm tone of outside markets this morning. Unless there is a vast improvement in risk sentiment heading into the holiday weekend, the Pound is likely to stay in close proximity to the lows of this month’s downtrend. The June Pound may rise up towards the 151.52 level later today, and will need to see a considerable “risk on” move in global markets in order to move back towards this week’s early highs.
JPY: The June Yen continued to gyrate wildly during the overnight session, but appears to have calmed down and is entering this morning’s trading with moderate gains. The extraordinary intra-day volatility seen in Japanese equity markets has reinforced the flight to safety wave into the Yen, as well as fuel a large liquidation move in Yen-based carry trades. While the Nikkei and JGB’s have generated plenty of news headlines of their own this week, remember that the main source of Yen volatility has come from weak Chinese data and Fed commentary – not from any tangible improvement in Japanese economic conditions. With that in mind, another run at the 99.00 level will provide a fresh opportunity to enter the short side of the Yen using long put option strategies. The June Yen could head down towards the 98.04 level later on in today’s session, and is likely to resume the longer-term downtrend if and when Japanese equity and interest rate markets are able to stabilize.
CHF: The June Swiss was able to recover from early pressure and has risen up towards a new weekly high this morning, but along with the Euro may have some difficulty maintaining upside momentum heading into the weekend. While this week’s events have provided a modest safe-haven bid to the Swiss Franc, the market may be waiting to see key Swiss economic data next week before taking prices up and beyond the late May trading range. Given the SNB’s threats of negative interest rates and of raising their 1.20 floor rate versus the Euro, the Swiss Franc remains vulnerable to a swift negative turnaround if recent safe-haven support starts to fade going into the weekend. The June Swiss may slide down towards the 103.62 area later in today’s trading, and with calmer markets should stay well clear of the 91/2-month lows posted earlier this week.
CAD: The June Canadian is finding severe pressure this morning and has given back a large portion of yesterday’s rebound from 101/2-month lows. This week’s Yen revival and lukewarm Chinese economic data has clobbered “commodity” currencies such as the Canadian Dollar, which is also facing headwinds from sluggish energy prices this morning. Outside markets need to show some consistent improvement, or the Canadian Dollar is likely to head further into new low ground ahead of next week’s Bank of Canada meeting. The June Canadian should find near-term support around the 96.46 level this morning, and will need global risk sentiment to make a positive turnaround in order to put the brakes on this current downdraft.