USD: The Dollar has been able to make a moderate rebound from a new low for the move overnight but still have some way to go in order to climb back into positive territory. While there is clearly a growing tone of risk aversion throughout global markets, the Dollar is clearly playing “second-fiddle” to the Yen as a safe-haven destination while Japanese equities continue to be the main source of global market turbulence early today. There will finally be some “top-tier” US economic data for the market to digest as a positive reception for weekly Jobless Claims and Retail Sales is likely to give the Dollar an additional boost. Sluggish equity markets both at home and abroad will provide enough of a flight-to-safety bid for the Dollar to avoid a retest of the overnight lows, but it will be difficult to make an extensive recovery as long as the Yen continues to hold this much strength. The Dollar may rise up above the 81.15 level soon after the US data window, but will likely finish out today’s trading near the bottom end of this month’s sizable downdraft.
EUR: The September Euro was unable to sustain an early rally up to a new 31/2-month high, but is holding up fairly well given the turbulence seen throughout global markets this morning. A better than expected reading for German Wholesale Prices may have provided some near-term support this morning, but it has proven to be too difficult for the Euro to fully get past diminishing risk sentiment early in today’s trading. Peripheral EU debt yields are starting to climb, and played a role with today’s lukewarm Italian auction results. With fresh news headlines of Greek protests also likely to erode market sentiment, the Euro may see more downside follow-through to this morning’s key reversal. The September Euro could fall back towards the 132.90 area.
GBP: The September Pound was able to reach another 4-month high early in today’s session, but the negative tone of outside markets has caused it to lose upside momentum this morning. While the recent strength in UK economic data should keep the Pound well supported at these current pries levels, it may prove difficult to hold onto this week’s gains if global risk sentiment deteriorates any further. The September Pound should find support around the 156.24 level this morning, and will be a major beneficiary in equity markets on both sides of the Atlantic can bounce back from early pressure later on in today’s session.
JPY: The September Yen has posted significant gains yet again this morning while reaching a new 2-month high, and at one point had almost recovered all of its losses in the wake of the April Bank of Japan meeting when aggressive easing measures were first introduced. A 6.3% selloff in the Nikkei has now taken Japanese equities more than 20% below their May 22nd close, which has fueled another massive safe-haven flight into the Yen this morning. The upcoming end of the second quarter is also causing significant unwinding of “carry” trades, which is providing the Yen with another source of strength this morning. While JGB yields stayed relatively subdued last night, Japanese authorities cannot be happy with recent price action in that nation’s financial markets. A positive read from today’s US data may take some steam out of the Yen’s rally, but any sizable pullback will only come if and when Japanese domestic flight-to-safety flows start to wind down. The September Yen may fall back towards the 105.64 level.
CHF: The September Swiss saw a sizable pullback from a new 4-month high this morning, but is managing to hold within positive territory coming into this morning’s trading. Today’s Swiss PPI reading was well below last month’s reading and has provided further evidence of Swiss deflation, which may leave the Swiss Franc vulnerable to further downside action if risk attitudes continue to deteriorate. The September Swiss will have a near-term downside target of 108.24, and may be setting up for a significant reversal of recent gains over the next few sessions.
CAD: The September Canadian has overcome lukewarm energy and metals markets, as well as sluggish global risk sentiment, to post sizable gains and reach a new 4-month high this morning. Today’s Canadian data on housing and capacity utilization will go a long way towards the Canadian Dollar building onto this early strength, as outside markets are unlikely to be much help today with sustaining this month’s rally. The September Canadian should climb up toward the 98.80 level.