New Highs for CHF and JPY

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The US dollar was stronger versus the euro but the real movers have been the safe haven Swiss franc and the Japanese yen. Yesterday's dreadful US PMI numbers dragged Asian and European bourses lower keeping the safe haven currencies bid into today's North American forex trading session.

Japanese officials are attempting to jawbone the yen lower with an increase of harsh rhetoric versus the strengthening currency. The stepped up speech-making over the past few days suggests the Japanese Ministry of Finance is leaning closer towards steps to stem the strengthening of the yen. Reuters reports the BOJ is ready to act should the yen appreciation prove to be destabilizing to the Japanese economy. To increase the effectiveness of any direct intervention in the forex markets the BOJ may accompany the JPY selling with an easing of monetary policy in the form of additional asset purchases. USD/JPY support comes in at the all-time low near 76.25 with short-term resistance at the falling trend line from the July 20th high at 77.80.

The CHF hit a new all-time low versus the US dollar and the euro as traders continue to use the Swiss franc as the safe-haven currency of choice. The SNB may be less aggressive than Japan to step in and weaken the CHF. Last time the SNB sold the CHF the central bank suffered an embarrassing $21B loss on its long euro and USD positions versus the CHF. A such the downward trends of the EUR/CHF and the USD/CHF my continue.

Data from Eurostat showed European PPI was flat for the month of June. Consensus forecasts for a 0.1% suggest inflation pressures are slowing, albeit by a small amount. Combining the inflation numbers with yesterday's Euro zone PMI data that was unchanged from a 2-year low suggests the ECB may have room to hold off on future interest rate increases as the EU economy slows. A break of 1.4150 and the EUR/USD may have scope towards 1.4100, a 61% retracement of the move from July 12th to yesterday's high.

Yesterday's disappointing US ISM Manufacturing PMI surveys have put equity markets in the red while supporting the USD. The Nikkei finished down -1.21% while the FTSE 100 is lower by 0.65%. A Senate vote to raise the US debt ceiling is set for 16:00 GMT. While nothing is set in stone all indicators point to the legislation getting the OK and signed into law by Obama.

A lack of important data releases on the economic calendar will keep market players focused on the debt ceiling vote as markets anticipate a heavy economic calendar tomorrow. The highlights for the day will likely be the ADP payrolls data and the ISM non-manufacturing survey. The ADP report has had a poor history of predicating Friday's jobs report while economists have had an even tougher time forecasting the payrolls report from the Bureau of Labor Statistics. Last month a surprise increase in the ADP report caused economists to increase their non-farm payrolls report only to overshoot the actual target by a wide margin.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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