USD: The Dollar has extended yesterday’s huge post-FOMC reversal with a sizable upside follow-through this morning, and has now retraced a large portion of the May-June downtrend in less than 18 hours. Fed Chairman Bernanke’s rather direct talk on the timing of upcoming tapering measures clearly wrong-footed global markets that were expecting vague “Fed-speak” on any potential move, which provided the Dollar with plenty of short-covering fuel for this current recovery rally. A decline in the “flash” HSBC/PMI survey of Chinese manufacturing is keeping the pressure on global equities, physical commodities and emerging markets, which in turn gave the Dollar a fresh safe-haven bid as well. US economic data may be an afterthought in the wake of Fed Chairman Bernanke’s comments, but another new low for Jobless Claims with a positive reading for the Philly Fed survey will extend this current rebound. The Dollar will have a near-term upside target of 82.35, and looks to have the upper hand on most major currencies during the balance of today’s trading.
EUR: The September Euro remains on the defensive early in today’s session, although the market looks to have found near-term support around the 131.80 level. This morning’s “flash” PMI numbers provided some positive surprises from France, but lukewarm readings from Germany have blunted any positive impact on the Euro this morning. Peripheral EU debt yields are on the rise this morning, which could not have come at a worse time with both Spain and France having debt auctions during today’s trading. ECB official have been trying to “talk down” the Euro for several weeks, but it now appears that the market may now be ready to do that job for them. The September Euro could slide down to the 131.55 area if and when overnight support levels are broken, although a large-scale washout may be unlikely as long as peripheral EU trouble-spots continue to stay out of the market’s news headlines.
GBP: The September Pound is holding up fairly well given the negative tone from outside markets, and appears to have put some brakes on this week’s pullback from 4-month highs. A much better than expected reading for UK Retail Sales will help push any potential new Bank of England easing measures well off into the future. While it will be difficult to overcome today’s Dollar strength, the Pound has a good chance of recovering a sizable portion of early losses if this morning’s US economic data disappoints the market. The September Pound should find decent support around the 153.84 area later today, and looks to have the best chance of any major currency to find positive territory again if this current Dollar rally runs out of steam.
JPY: The September Yen expectedly had the most negative reaction to Fed Chairman Bernanke’s comments, and is on-course to posting a third straight heavy loss during today’s session. Last night’s sluggish Chinese HSBC/PMI number, weak Japanese equities and the collapse in Asian emerging markets currencies have provided little benefit to the Yen, as safe-haven support is flowing back across the Pacific and into Dollars this morning. While there has been some noticeable improvement with recent Japanese economic data, most of those positive data points (such as yesterday’s strong Exports reading) can be attributable to the recent weakness in the Yen. The Fed may be pulling back on their asset purchases in the near future, but the Bank of Japan’s aggressive easing measures look to have a long way left to go. The September Yen is likely to retest the 101.79 overnight low later this morning, and looks to have much further downside left to go before this sell off runs out of steam.
CHF: The September Swiss was able to gain ground on the Euro this morning but is finding significant pressure heading into this morning’s trading session. The Swiss National Bank held firm with monetary policy and their current “peg” with the Euro, and also expects that the value of the Swiss Franc “should fall further” over the next few quarters. With the SNB also saying that they stand ready to “take further measures at any time”, the potential for negative Swiss deposit rates cannot be discounted over the near future. The September Swiss will have a near-term downside target of 106.80, but remains vulnerable to a large-scale sell off given its sharp gains during the past few weeks.
CAD: The September Canadian has been hammered during the past few hours, and has now all but erased this month’s rally in the past two days. Plunging energy and metals prices are adding to the Canadian Dollar’s woes this morning, as there are no major Canadian economic numbers until tomorrow’s CPI and Retail Sales readings. New BOC Governor Poloz’s comments were lost in the wave of post-Bernanke market reaction, but his remarks did appear to diminish any chances for Canadian rate cuts during the near future. The September Canadian may find near-term support around the 96.10 level later today, and may be heading for a retest of the late May lows if upcoming Canadian data disappoints the market.