DOLLAR: The Dollar has found its footing and regained upside momentum early today to post a solid gain and reach its highest price level since its post-payrolls nosedive. While it may still be a second choice to the Yen as a safe-haven destination, the Dollar is starting to benefit from a risk-averse mood that is building throughout global markets. This morning’s set of US data, particularly the May retail sales number, will need to post positive results for the Dollar to maintain its recovery move but it appears that the marketplace has come to terms with the Fed not hiking rates at this week’s meeting. The Dollar remains on-track for a move up and beyond the key 95.00 level, but a strong upside extension may have to wait until the Fed has their say on US and global economic conditions tomorrow afternoon.
EURO: The Euro is back on the defensive as it has erased all of yesterday’s rebound this morning. The murder of a French police chief has further ramped up anxiety in the region, while the market has taken little note of better than expected results from Euro zone industrial production figures. News that German 10-year yields have fallen into negative territory for the first time ever will also weigh on the Euro in the run-up to next week’s Brexit vote. Near-term support is down at 1.1224 as the Euro may need a significant revival of risk appetites to put some near-term breaks on this slide.
YEN: The Yen continues to be the safe-haven destination of choice this morning, but interestingly could not breach the 95.00 level or retest the early May highs during the overnight session. While in-line with forecasts, a negative year-on-year reading for April industrial production is a reminder of how sluggish the Japanese economy has been recently. Buy corrective dips back down to 94.33, but keep protective stops fairly tight going into the FOMC window.
SWISS: The September Swiss has been able to hold its ground within its recent consolidation, but is showing lukewarm strength at best given the turbulence in global markets this morning. Although there have been some highlights with recent Swiss data points, carryover pressure from the Euro zone is dragging it further away from its recent highs. A rebound to the 1.0450 level remains a near-term selling opportunity.
POUND: A weaker than expected reading for UK CPI has added further weight to the Pound this morning, although it was able to hold key support just above the 1.4100 level. A major UK bookmaker said that “leave” could become favorite in referendum betting by this weekend if current trends continue, which is being supported by recent opinion polls. For now, near-term rallies remain selling opportunities but traders should be well aware that it would not take much of a shift back towards the “stay” camp to trigger a significant short-covering rebound.
CANADIAN DOLLAR: The Canadian has been undermined by the current “risk off” mood, but has been able to survive a retest of its 50-day moving average at 77.73 earlier today. Stronger support should be found just above the 77.50 level, but the Canadian clearly needs a vast improvement in risk appetites in order to regain upside momentum.
TODAY’S MARKET IDEAS: The Yen will continue to benefit from safe-haven flows but is starting to look a little top-heavy this morning. The Pound is vulnerable to a sharp short-covering rebound if opinion polls start to shift back towards the “stay” camp.