USD: The Dollar is finding mild support early in today’s trading, but has been unable to sustain any extended recovery from yesterday’s sharp downdraft. Given last week’s abrupt dovish shift by Fed Chairman Bernanke, it has taken little urging for Dollar bulls to head towards the sidelines in front of his congressional testimony later today. An article from a well-read “Fed-watcher” downplaying the impact of recent improvement with the Fed’s tapering gauges of unemployment and inflation clearly spooked the market, which took little if any note of some decent results from yesterday’s US data. The Dollar should get a lift from today’s Housing numbers, as that sector has been a consistent source of strength to the US economy, but the market is clearly going to wait for Fed Chairman’s Bernanke comments later today before taking prices well clear of this week’s lows. The Dollar may climb up towards the 82.94 level after today’s US housing data, and will need some definitive signs from Chairman Bernanke that Fed tapering is on the horizon, for the market to re-challenge this week’s early highs.
EUR: The September Euro made a brief attempt to extend this week’s rally, but has lost upside momentum and is finding modest pressure this morning. Given the generally sluggish tone of recent Euro zone economic data, and with still-smoldering problems throughout the peripheral EU, the Euro is clearly benefiting more from Dollar weakness than from any decisive improvement in conditions in that region of the globe. As long as debt yields remain subdued, both in the core and the periphery of the EU, the Euro should hold up relatively well in front of Fed Chairman Bernanke’s comments this morning. Given the potential for EU problem spots to flare-up quickly, however, the Euro remains vulnerable to a swift downside move, if tapering expectations are given a boost by this morning’s Bernanke testimony. The September Euro may fall back towards the 131.16 area after the US data window, and is beginning to show signs of being top-heavy at or above these current price levels.
GBP: The September Pound saw an abrupt change of fortune this morning as a sharp updraft this morning has taken prices out of negative territory and all the way to a new high for this recovery rally. The market was clearly surprised with the contents of this morning’s Bank of England meeting minutes, as a 9-0 vote for unchanged policy indicates that support for fresh QE may have actually gone down at new Governor Carney’s first meeting in charge. Stronger than expected UK Unemployment data has provided further strength to the Pound, which should help to keep the Pound in positive territory even if there is a hawkish shift from Fed Chairman Bernanke later today. The September Pound may give back a portion of overnight gains and pull back towards the 1.5168 area this morning, but should stay relatively well supported throughout the balance of today’s trading.
JPY: The September Yen has been on the defensive through most of the overnight session, although the market is staying clear of the key 100.00 level early this morning. A near-term boost in the Yen’s flight to safety support has already begun to erode, even before Fed Chairman Bernanke’s testimony this morning has been fully digested by the market. Japanese stocks have been grinding their way higher, which has also undercut the Yen’s recent strength. With this weekend’s Japanese Upper House elections likely to reinforce the control of the LDP/New Komeito coalition, the Yen may have to get some fairly dovish commentary out of Fed Chairman Bernanke in order to pull out of this current slide. The September Yen should find near-term support around the 100.15 level later today, and looks to be heading down to much lower price levels during the next few weeks of trading.
CHF: The September Swiss was able to recover from early pressure to climb up and match yesterday’s monthly high, and remains fairly well supported early in this morning’s trading. A sizable jump in the Swiss ZEW survey has helped to reinforce early strength, but the Swiss Franc will need Fed Chairman Bernanke to avoid boosting tapering expectations in order to build onto early gains and reach a new high for the move. The September Swiss may pull back towards the 106.36 area later today, and looks to remain in fairly close proximity to the recent highs over the course of today’s session.
CAD: The September Canadian is finding moderate pressure this morning, due in large part to sluggish energy and metals prices, but it is holding up fairly well in front of today’s Bank of Canada meeting. Uncertainty over new BOC Governor Poloz’s policy stance has encouraged some traders to head to the sidelines, but an indication that their tightening bias has remained in place and that should help to turn prices back towards the upside. The September Canadian may bounce back towards the 96.25 level early in today’s trading, but will need help from the Bank of Canada meeting results in order to climb up towards a new weekly high.