USD: The Dollar lost upside momentum and is posting moderate losses early this morning and while staying well below yesterday’s spike highs, has given back little of last week’s sizable rally. Comments from the Chinese central bank have helped to ease concerns over potential bank liquidity problems in that nation, which is dampening risk aversion in global markets and has eroded a portion of the Dollar’s residual safe-haven support. Statements from Fed Regional Presidents Fisher and Kocherlakota continue to weigh on the Dollar this morning, as they were seen in some quarters as trying to soften the impact of last week’s post-FOMC tapering rhetoric. This may put additional emphasis on today’s US data, however, as a strong set of readings may provide fresh momentum to Fed tapering speculation. The Dollar could bounce back to the 82.75 level.
EUR: The September Euro’s recovery this week appears to have run out of steam, although losses have been modest so far and prices remain well above yesterday’s spike lows. An official stated that the ECB is “far away” from exiting their accommodative monetary policy, which helped to take the Euro well away from the overnight highs. While improving global risk sentiment has provided a significant amount of support to the Euro over the past two sessions, peripheral EU concerns continue to smolder and clearly had a negative impact on Spanish and Italian short-term debt auctions this morning. Unless there is a sizable improvement with global risk appetites, the Euro may be vulnerable to further downside with 130.96 as next support.
GBP: The September Pound has kept within a fairly tight trading range during the overnight session, but has been able to maintain a positive tone coming into this morning’s session. While the Pound will benefit from sustained improvement in global risk sentiment this morning, it may be difficult to put together a large upside move after Bank of England officials appeared to signal accommodative monetary policy at their parliamentary testimony this morning. The September Pound may climb up towards the 154.70 level.
JPY: The September Yen followed-through with yesterday’s sizable recovery with hefty gains this morning, although prices appear to have lost upside momentum during the past few hours. Chinese liquidity concerns have been dampened but by no means have been fully extinguished, which will provide a fresh source of flight to safety support for the Yen this morning. Comments by BOJ Deputy Governor Iwata that the Bank of Japan has no plans to step into the market to dampen Yen volatility were the catalyst for yesterday’s turnaround, but are unable to help the Yen recover a large portion of recent losses until Fed tapering hopes are fully diminished. As long as Chinese banking problems ripple through Asian markets, however, the Yen should hold onto enough safe-haven support to avoid a full-scale downdraft for now. The September Yen may slide back towards the 102.31 level.
CHF: The September Swiss could not sustain yesterday’s rebound and is falling back on the defensive this morning. There may be enough inflow of safe-haven support from the Euro zone and emerging markets to keep the Swiss Franc from retesting yesterday’s low for the move, but the market remains vulnerable to an extensive selloff given recent comments by SNB officials that a stronger currency will have serious consequences for their economy. The September Swiss may fall back towards the 106.84 area short-term and we would not rule out an eventual move to 103.75.
CAD: The September Canadian was able to post moderate gains this morning, but is still looking up at close to 3 cents in losses sustained after the reversal on June 14th. Energy and metals markets have a generally positive tone this morning, but the Canadian Dollar will need stronger improvement with risk sentiment and upcoming Canadian economic data in order to recover any sizable portion of recent losses. The September Canadian may extend today’s rebound to the 95.50 level but will be hoping from stronger outside markets in order to hold onto today’s early gains.