USD: The Dollar had a very good holiday and continues to drive further into new high ground this morning, as dovish central bank comments from Europe and a volatile situation in Egypt are providing the fuel for a sharp upside move. This week’s US economic data has generally been positive, but has taken a backseat role to overseas factors since Wednesday’s close. Market focus will shift back towards these shores with today’s main event, the monthly US Employment report. There is certainly room for disappointment with Non-Farm Payroll forecasts focusing on a gain of 160,000 or higher, but the Dollar is unlikely to fall far from this morning’s early highs due to the central bank guidance from across the Atlantic. While a decent set of US jobs data will extend this current rally, it would take some blockbuster Payroll numbers in order for the Dollar to challenge the mid-May highs. Look for the Dollar to maintain a positive tone going into this morning’s trading, and will then take direction from how the market feels that today’s US Employment data will reinforce the case for upcoming Fed tapering measures.
EUR: The September Euro is finding little support early today, and continues to fall further away from the key 130.00 level coming into this morning’s trading. ECB President Draghi’s post-meeting comments continue to be an anchor around the Euro, as a commitment to low rates for an extended period – with potential for even lower rates on the horizon – flew in the face of ECB tradition and clearly was much more candid than the market was expecting. This has all but obliterated any benefit from calmer conditions in Portugal, and put the Euro squarely on the defensive in front of today’s US data window. With this sea-change in ECB forward guidance, it will be difficult for the Euro to put together any sort of extensive recovery unless today’s US jobs are shockingly below expectations. The September Euro may find near-term support around the 128.45 area, and looks to head below the 125.00 level over the next few weeks of trading.
GBP: The September Pound continues to fall further into new low ground this morning, and has fallen below the 150.00 level for the first time since early March. While BOE officials have hinted of easier UK monetary policy over the past few weeks, yesterday’s comments that the recent rise in UK rates was “not warranted” was seen by many traders as a clear sign that dovish forward guidance will be coming at their August meeting. Even with poor US jobs data, it will be difficult for the Pound to put together any extensive recovery from this current downdraft. The September Pound looks to be heading down towards the 149.12 level by the close of today’s trading session.
JPY: The September Yen is holding up fairly well at the end of this week, as fresh flight to safety flows from Europe and the Middle East have helped to offset diminishing Chinese liquidity concerns. Given the Yen’s longerterm prognosis, it will clearly remain a second-choice safe-haven destination to the Dollar going forward. The Yen will likely have the strongest upside reaction to any negative surprises with today’s US jobs data, although any large-scale rally from these levels will provide a fresh opportunity to enter the short side of the market. A fresh low for this downmove may be difficult to achieve even with strong US data later this morning, but a retest of the mid-May lows looks to be on the horizon during the next few weeks. The September Yen should hold in close proximity to the key 100.00 level coming into this morning’s US data window, and will need to see some disappointing Payroll numbers in order to lift clear of these recent low levels.
CHF: The September Swiss remains firmly in a sharp selloff, as calmer conditions in Portugal have caused it to lose ground to an already plunging Euro. Today’s Swiss CPI data came in mildly better than expected, but has done little to relieve concerns over that nation’s well-entrenched deflation. Unless there are some surprising poor US jobs numbers later this morning, the Swiss Franc looks to heading down to even lower price levels during the next few weeks. The September Swiss may find near-term support around the 104.00 area, but will remain squarely on the defensive during the balance of today’s session.
CAD: The September Canadian was unable to sustain a rally to a new monthly high, and is finding mild pressure coming into this morning’s trading session. There is some apprehension in the market over today’s Canadian jobs data, as a lukewarm reading for June may be matched by a sharp downward revision for May. Unless there are strong Employment readings from both sides of the US/Canada border, the Canadian Dollar will have difficulty breaking out above this current trading range. The September Canadian should find support around the 94.55 area coming into today’s data window, and clearly will be taking direction from the tone of this morning’s Canadian and US jobs numbers.