USD: The Dollar was able to bounce back from a new 4-month low and post a modest gain this morning, although the market remains firmly rooted to the bottom of this month’s downdraft in front of today’s main event, the FOMC meeting results and post-meeting press conference. While recent US economic data has avoided any negative shocks, there have been few readings that were decisively strong enough to fuel Fed tapering ideas. At this point, the Dollar appears to have “priced-in” the idea that while tapering will not have a definitive start-up over the near-term, the Fed will drop enough hints in their rhetoric to let the market know that it is on the horizon. Relying on market interpretation of Fed statements will likely make the final hours of today’s session fairly volatile, but the Dollar may need to hear some decisive wording that Fed tapering is on its way in order to lift clear of these recent lows. The Dollar should climb up towards the 80.95 level in front of the FOMC announcement, but is likely to remain within this current trading range unless the Fed can surprise the market with some clear-cut statements on the timing and magnitude of any upcoming Fed tapering measures.
EUR: The September Euro is finding moderate early pressure this morning, but remains fairly well supported and is holding within close proximity to yesterday’s new 4-month high. While ECB have tried to “talk down” the Euro in recent weeks, this current rally has been due more to the lack of bad news that to any positive transformation of the Euro zone economy. Yesterday’s 2 point jump in the German ZEW survey continues to provide underlying support, as it has helped to keep peripheral EU debt yields fairly subdued this week. While overt Fed tapering statements may take the Euro further below the recent highs, it may take negative news from the EU in order to derail this current uptrend. The September Euro may find near-term support around the 133.75 area, and may see additional pressure if the Fed does make some definitive tapering signals with today’s FOMC meeting results.
GBP: The September Pound is posting moderate losses this morning, and continues to slide further away from this week’s early highs. Bank of England meeting minutes released this morning noted little change in voting for fresh QE measures, although some in the market feel that there is a stronger chance of easing now that new BOE Governor Carney comes on board next month. After yesterday’s wild trading day, the Pound should stay fairly well supported after the FOMC meeting even if Fed tapering expectations are boosted by today’s results. The September Pound should find support around the 155.90 level, and should stay well inside of yesterday’s trading range even if the FOMC surprises the market.
JPY: The September Yen bounced back from overnight pressure and is posting moderate gains this morning, and appears to be consolidating just above the 105.00 level in front of today’s critical events. While the Nikkei posted another strong gain, the Yen was able to overcome the loss of safe-haven support due to a better-thanexpected reading on Japanese exports during May. While flight-to-safety flows and end-of-quarter short-covering continue to fuel this current upmove, the Yen will be vulnerable to a sharp downside move if the Fed does signal that tapering is on the way. Japanese equities appear to have found their footing after 3 daily gains in the past 4 sessions, which should keep the Yen well away from the recent highs even if the Fed disappoints the market later today. The September Yen may retest the overnight high of 105.50, but is likely to have one of the stronger and more negative price reactions if the Fed makes a definitive sign that tapering measures are on their way.
CHF: The September Swiss was unable to sustain yesterday’s late upside move, and is drifting back towards the middle of this week’s trading range early in today’s session. While the FOMC meeting results could apply additional pressure later in the session, the Swiss Franc should hold onto enough safe-haven support to avoid a retest of this week’s lows. The September Swiss may find support around the 108.55 level and will remain fairly subdued until the Fed is heard from later on today.
CAD: The September Canadian made a sharp rebound from a new weekly low during overnight trading, but continues to have trouble sustaining upside momentum and remains well below last Friday’s high for the move. Stronger reading from upcoming Canadian economic data will be a critical factor for the Canadian Dollar with recovering from recent losses. The September Canadian could climb up towards the 98.00 level in the wake of today’s FOMC results but will need further help from the Canadian data in order to revive this month’s up move.