USD: The Dollar was unable to sustain an early rebound from a new 51/2-week low reached during overnight trading, and is starting out this week firmly rooted to the bottom of this month’s extensive downtrend. The Dollar has found little benefit from recent US economic data, as the tone has not been consistently strong enough to overcome the diminished chances of near-term Fed tapering. Until the market has a chance to receive clearer guidance from the Fed after Wednesday’s FOMC meeting, the Dollar will have a difficult time shaking off expectations that US benchmark rates will remain low for an extended period of time. A fresh infusion of safe-haven support will help, but it appears that the Dollar may continue to play second fiddle to the Yen in being a flight-to-safety destination early this week. The Dollar may bounce back into positive territory and climb up to the 81.83 area after the US data window, but clearly needs to see a revival of Fed tapering prospects in order to lift clear of these recent lows.
EUR: The September Euro has quietly consolidated near the upper end of this current uptrend, but has been unable to break out into new high ground early in this week’s trading. A well-received Italian 6-month bill auction is helping to underpin early gains in the Euro, as it reflects the calmer risk conditions in the peripheral EU early this week. As long as Portugal, Greece, and other potential EU trouble-spots stay quiet news-wise, emerging signs of growth in the region will keep the Euro fairly well supported at these levels. It may be difficult to see a large upside extension without the benefit of stronger Euro zone data or a bona-fide “risk on” mood in global markets, but the Euro should be able to maintain a positive tone through the early part of this week. The September Euro may climb up to the 133.12 level and is likely to remain in close proximity to the recent highs in front of key central bank meetings on both sides of the Atlantic later this week.
GBP: The September Pound is finding mild support this morning, but continues to find surprisingly little benefit from recent UK economic data as a positive reading on the CBI Distributive Trades survey failed to lift prices by any meaningful measure. There is clearly some concern in the market that the Bank of England may take a “dovish” shift in monetary policy at Wednesday’s meeting, which is helping to keep further gains for the Pound in check this morning. The September Pound may rise up towards the 153.94 area later today, but at this point will need to hear from the Bank of England later this week before this current upmove has any chance of reaching new high ground.
JPY: The September Yen continues to drive further to the upside this morning, and has now reached the highest prices levels since late June. While last night’s reading on Japanese Retail Sales was modestly below market forecasts, a 1.6% year-on-year increase will provide some tangible evidence of an improving Japanese economy. BOJ Governor Kuroda highlighted the positive results of their recent easing measures in a speech during the overnight session, although his remarks on the impact of a potential sales tax hike may highlight some rising concern in the market that those measures may ultimately be delayed or watered down. With sliding Japanese equities and diminishing Chinese growth prospects provided a steady flow of flight-to-safety support, the Yen is likely to hold onto this current strength early this week. The September Yen may climb up towards the 102.54 area but will need Fed tapering prospects to remain subdued in order to sustain this upside breakout through the rest of this week’s trading.
CHF: The September Swiss has held its ground near the top end of this month’s recovery rally, but along with the Euro is showing some early reluctance to climb up into new high ground this morning. As long as peripheral EU trouble-spots continue to remain quiet, the Swiss Franc will lose further ground to the Euro. The September Swiss may retest last Friday’s high for the move of 108.00.
CAD: The September Canadian is grinding its way higher this morning, and is finding support from improving energy and metals markets early in today’s trading. Recent improvement in Canadian economic data has also helped, but the market will need to get past a critical reading on Canadian GDP later this week before the Canadian Dollar can make a decisive upside move. The September Canadian will have a near-term upside target of 97.40 and should maintain moderate upside momentum early in this week’s trading.