USD: The Dollar was able to make a fairly sizable comeback this morning, but still has a long way to go in order to fully recover from a brutal 12 hours of trading. While there were signs of support for near-term tapering from several Fed members contained in yesterday’s FOMC meeting minutes, Fed Chairman Bernanke’s comments that the US would continue to have “highly accommodative monetary policy for the foreseeable future” triggered a massive washout of long Dollar positions. The late afternoon timing of Fed Chairman Bernanke’s comments clearly helped to exaggerate the Dollar’s slide, as it is traditionally the most illiquid period of the day, but there is no mistaking the amount of near-term chart damage that the Dollar needs to repair. Today’s Jobless Claims data may provide some additional strength to the Dollar’s recovery, but it may take some positive comments out of the Fed (as well as some reconciliation of yesterday’s statements by Fed Chairman Bernanke with his post-FOMC meeting comments last month) in order for the Dollar to fully regain upside momentum. The Dollar may be able to fill in the chart gap with a move up to the 83.65 area later in today’s session, but will need a substantial revival of Fed tapering expectations in order to fully regain the losses sustained since yesterday morning.
EUR: The September Euro ended up being the major beneficiary of the Dollar’s collapse, as the market was able to recover most of the late June-early July down move without the benefit of any major positive news from their side of the Atlantic. Even so, recent developments since the July 4th ECB meeting made the Euro extremely “top-heavy”, which is why the market has fallen more than 1.5 cents below the overnight highs already this morning. Although the ECB “clarified” one of their key policymaker’s statement that their pledge to keep rates at record lows will go beyond 12 months, there is clearly more consistency from the ECB with holding onto accommodative monetary policy than seen from the Fed yesterday afternoon. With still-smoldering peripheral EU problems and lukewarm economic data from throughout the region adding further headwinds, the Euro will have a very difficult time retesting the overnight highs anytime soon. The September Euro may find support around the 130.15 level later in today’s session, and needs to see some positive developments from their area of the globe in order to regain last night’s upside momentum.
GBP: The September Pound recovered a large portion of this month’s losses during the past 24 hours, and once again continued this week’s pattern of being unable to sustain upside momentum. With recent poor UK economic data casting a long shadow over the market, the Pound is unlikely to be hold above the 150.00 level by the end of this week’s trading. The September Pound may find support around the 150.46 level later today, and will need to shake off the rising expectations of fresh BOE easing measures in order to head back towards the overnight highs.
JPY: The September Yen has lagged well behind the major European currencies with finding benefit from the Dollar’s meltdown, and has already given back a large portion of overnight gains this morning. There were few surprises from last night’s Bank of Japan meeting results, which held off on fresh easing measures as well as upgraded their view of the Japanese economy. However, they gave little indication that they would be stepping back from their aggressive easing measures anytime in the near future. With upper house elections later this month likely to give a stronger mandate for stimulus from the fiscal and monetary sides of the equation, the Yen is likely to see new lows for this current downdraft as well as for 2013 in the near future. The September Yen may
slide down towards the 100.35 level later this morning, with any near-term rebound back above the 101.15 area providing a fresh opportunity to enter the short side of the market.
CHF: The September Swiss was able to post solid gains for a second straight session, but along with the Euro is having a difficult time sustaining upside momentum into this morning’s trading. A recent negative shift in Swiss economic data is likely to keep the Swiss Franc from building onto this week’s sharp rebound, as the SNB will keep their current 1.20 floor rate firmly in place going forward. The September Swiss may find near-term support around the 105.00 level later this morning, and is likely to fill in the chart-gap down below the 104.50 level during the next few sessions.
CAD: The September Canadian was finally able to break out above the recent trading range with plenty of help from Fed Chairman Bernanke, but may be in a better position than other major currencies to sustain this rally going forward. If upcoming Canadian economic data can come close to matching the strength of this week’s housing data, the Canadian Dollar can build on carryover support from energy and metals markets to maintain upside momentum. The September Canadian may climb up towards the 96.25 area later today, and should stay well clear of the late June/early July trading range going forward.