USD: The Dollar has been weakened by profit-taking in front of this afternoon’s Fed dialogue, and is finding moderate pressure after a bumpy overnight trading session. Although shockingly poor Chinese trade numbers have thrown a scare into equity markets around the globe, the Dollar was unable to retest yesterday’s high for the move and clearly lost out to the Yen as a flight-to-safety destination. While last Friday’s strong Payroll numbers continue to underpin the Dollar, there has been little in the way of fresh US data to reinforce that strength early this week. There appears to be plenty of room for disappointment given the sharp gains over the past few weeks, which may keep the Dollar on the defensive until FOMC meeting minutes take center stage late in today’s trading. The Dollar may find near-term support around the 84.35 during today’s session, and should be able to hold within this week’s trading range as long as Fed tapering ideas are not severely dampened by the FOMC meeting minutes this afternoon.
EUR: The September Euro was able to put together a sizable recovery from yesterday’s 7-month lows, but still remains near the bottom end of a fairly sharp downdraft this morning. The ECB has “walked back” a statement by one of their key policymakers that last week’s pledge to keep rates at record lows will go beyond 12 months, which is providing additional short-covering fuel for today’s rebound. Yesterday’s credit rating downgrade of Italy may not have come as a total shock, but did provide a fresh source of anxiety to a market that had been focusing on recent events in Greece and Portugal. The Euro may be able to build on early gains if today’s Fed dialogue disappoints the market, but will need to see clear improvement with economic data from around the EU in order to sustain any recovery. The September Euro may climb up towards the 128.55 level later this morning, and should be able to maintain a positive tone as long as peripheral EU debt problems can manage to stay out of the market’s spotlight during today’s session.
GBP: The September Pound has been able to put the brakes on its longer-term downdraft this morning, but will clearly need more than near-term Dollar weakness to mount any extensive recovery from these current price levels. Until upcoming UK economic data can show consistent strength, the shadow of potential BOE easing measures will keep the Pound sliding further into new low ground. The September Pound may bounce back above the 149.00 level in a post-FOMC meeting rally late in today’s session, but will need a vast improvement in the tone of outside markets to have any chance of retesting the weekly highs.
JPY: The September Yen has become the main beneficiary of last night’s poor Chinese trade data, with a fresh infusion of safe-haven support taking prices all the way back above the key 100.00 level this morning. Shortcovering and profit-taking, not only in front of this afternoon’s Fed comments but also in front of tonight’s Bank of Japan meeting, are adding extra strength to today’s recovery rally. While the BOJ is likely to improve their outlook for the Japanese economy, their recent aggressive easing measures should remain firmly in place. The Yen’s longer-term downtrend is far from over, so any post-BOJ meeting rally is likely to provide a fresh opportunity to enter the short side of the market. The September Yen may retest the overnight high of 100.28 later in today’s session, and is likely to remain well supported until the Bank of Japan is heard from later tonight.
CHF: The September Swiss was able to bounce back from yesterday’s 6-week low, but is showing few signs of fully recovering from recent chart damage early this morning. While there may be room for upside follow-through if today’s Fed comments disappoints the market, the recent negative shift in Swiss economic data is likely to keep any further gains in check. The September Swiss should find resistance around the 103.50 level later today, but remains firmly within this current downtrend and remains on-course for reaching a new 2013 low during the near future.
CAD: The September Canadian could not sustain an overnight move above the 95.00 level, but is holding up fairly well in spite of poor Chinese trade numbers last night. Yesterday’s robust Canadian housing data is clearly a step in the right direction, but the Canadian Dollar may need further evidence of improving economic conditions north of the US/Canada border before breaking out above this current trading range. The September Canadian should bounce back towards the 95.05 area later in today’s session, and should continue to build onto this week’s recovery rally.