USD Mired Near Record Lows by Korman Tam

At 8:30 AM Canada Q2 Current Account Balance (exp 83.2%, prev 83.0%)
US Weekly Jobless Claims (exp 325k, prev 318k)
At 10:00 AM US August Federal Budget

The dollar is mired near its lows against the euro amid heightened fears of accelerated deterioration in US economic fundamentals, to the extent of a recession. Markets are largely expecting the FOMC to jumpstart the economy with at least a 25-basis point rate cut when it deliberates policy next week. However, a shift in policy is not a foregone conclusion in light of recent conflicting comments from Fed officials, in which some reiterated lingering inflationary concerns.

In the session ahead, the US economic calendar is light with the release of weekly jobless claims and the August federal budget. The key reports will be released on Friday, consisting of August retail sales, Q2 current account balance, industrial production, capacity utilization, business inventories and the University of Michigan sentiment survey. The retail sales report will bear additional significance since it will be the last piece of consumer spending data the Fed will see before its policy setting meeting next week.
Euro Buoyed Near All-Time Highs

The euro remains favored as it hovers near its all-time highs just under the 1.39-figure. Although it remains unclear whether the ECB will continue its tightening cycle in the face of recent financial market turmoil, the Bank is largely expected to raise rates by 25-basis points by year-end to lift its benchmark lending rate to 4.25%. We expect the single currency to remain supported over the coming weeks, with an interim target of 1.40.

EURUSD holds steady near 1.39, with ceilings seen at 1.3920, followed by 1.3950 and 1.40. Support begins at 1.3860, backed by 1.3830 and 1.38.

Yen Mixed

The yen fell against the dollar while edging up higher versus the euro and sterling. Japan’s Prime Minister Abe resigned from his post amid a series of scandals and a poll defeat. However, the abrupt announcement had little impact on the currency market.

USDJPY trades near 114.30, with interim resistance starting at 114.60, followed by 115 and 115.50. Additional ceilings are seen at 115.75 and 116. Support starts at 114, followed by 113.70 and 113.40. Subsequent floors are eyed at 113, followed by 112.50 and 112.