USD: The Dollar has been unable to sustain strong upside momentum during the past few hours, but is holding onto moderate gains at the start of the new trading week. Chinese liquidity concerns are casting a long shadow over global markets, and have provided the Dollar with a fresh source of safe-haven support. While there will be no major US economic data for the market to digest, last week’s direct Fed tapering dialogue is helping to underpin recent gains. As long as there is an undercurrent of risk anxiety running through global markets, the Dollar is likely to remain well supported at these levels. The Dollar may retest the overnight highs at 82.95 if risk appetites remain subdued.
The Commitments of Traders Futures and Options report as of June 18th for US Dollar showed Non-Commercial traders were net long 14,562 contracts, a decrease of 28,598 contracts. The Commercial traders were net short 19,463 contracts, a decrease of 30,006 contracts. The Nonreportable traders were net long 4,900 contracts, a decrease of 1,408 contracts. Non-Commercial and Nonreportable combined traders held a net long position of 19,462 contracts. This represents a decrease of 30,006 contracts in the net long position held by these traders.
EUR: The September Euro remains on the defensive this morning, and has slumped to a new 21/2-week low early in today’s session. While the German IFO survey showed a 0.2 gain for the month, the reading was in-line with forecasts and has done little to improve market sentiment in the wake of Chinese liquidity concerns. EU Finance Ministers were unable to find common ground on resolving bank failures, and there continues to be fresh signs of trouble from Greece with the viability of their bailout. Unless there is a vast turnaround in global risk sentiment, the Euro is likely to face additional pressure and the September Euro may slide down to the 130.70. The Commitments of Traders Futures and Options report as of June 18th for Euro showed Non-Commercial traders were net long 18,673 contracts, an increase of 26,387 contracts which represents a change from a net short to net long position. The Commercial traders were net short 10,574 contracts, an increase of 35,731 contracts which represents a change from a net long to net short position. The Nonreportable traders were net short 8,098 contracts, a decrease of 9,345 contracts. Non-Commercial and Nonreportable combined traders held a net long position of 10,575 contracts. These traders have gone from a net short to a net long position.
GBP: The September Pound slumped to a new 21/2-week low during overnight trading and remains under significant pressure going into this morning’s trading. While recent UK economic data has shown enough improvement to keep potential Bank of England easing measures off the table for now, the negative tone of outside market will make it difficult for the Pound to bounce from these early losses. The September Pound may fall down towards the 153.10 support level.
JPY: The September Yen was able to make a sizable recovery from severe overnight losses, but has been unable to hold in positive territory early this morning. The Yen has clearly found some benefit from this week’s “risk off” mood in global markets, although it will remain a second-choice safe-haven destination to the Dollar in the wake of last week’s Fed tapering comments. A decisive victory for the LDP party in local Tokyo elections will weigh on the Yen early this week, however, as it will give Prime Minister Abe’s government fresh incentive to enact measures to stimulate the Japanese economy. While sluggish Japanese stocks and still volatile JGB yields are providing some measure of support, the Yen is likely to head much lower if and when global markets start to calm down. The September Yen may fall back towards the 101.71 level.
CHF: The September Swiss bounced back from a new low for the move this morning, but is having trouble following through into positive territory. The Swiss Franc is finding a modest safe-haven bid early this week, but recent rhetoric from SNB officials over the comparative strength of their currency will make it difficult for the market to fully regain upside momentum. The September Swiss will have near-term downside target of 106.83, but remains vulnerable to an extensive sell-off if and when global markets are able to shake off their current risk anxiety.
CAD: The September Canadian has been able to regain a sizable portion of early losses, but remains squarely on the defensive after making a new 20-month low early in this week’s trading. With recent Canadian economic data providing few highlights, stronger energy and metals prices will be needed for the Canadian Dollar to recover any large portion of the 3 cents in losses that have been sustained over the 6 trading sessions since the June 14th close. The September Canadian could fall back towards the 94.80 area.