• German DAX index falls 4% in 15 minutes; closes down 1.7%
  • Rumor driven trade; German downgrade talk dismissed by ratings agencies
  • Weekly jobless claims rise to 417,000 vs exp 405,000
  • Buffett injects $5 bln into BofA
  • BOE’s Weale: BOE has to be ready to support British economy if needed
  • BOE and ECB extend swap agreement until September 2012
  • Germany’s Schaeuble: Europe should go it alone on trading tax, if necessary
  • Greek bond yields reach record highs, 45% in 2-year maturity
  • France, German, Spain extend short-selling ban until end of September
  • Germany says Finnish collateral deal with Greece a no-go; bailout in jeopardy
  • French jobless up 36,000
  • S&P 500 falls 1.6% to 1159
  • US 10-year note yield falls 6 bp to 2.235%
  • Gold rebounds from $1704 lows, ends at $1769 as stock, bank jitters, Greek/Finland standoff

Another early Euro rally fades badly from resistance in the 1.4475 area (have we seen this movie before?). Fears the Greek bailout could unravel over Finnish collateral demand, a sharp, unexplained drop in the DAX and a failed rally in US stocks despite a Buffett lifeline for BofA turned the market very risk averse.

EUR/USD tumbled with the DAX, reaching 1.4327 before rebounding. It ends the session back above the 100-day average (1.4367) at 1.4380. More flailing about but ending up nowhere.

USD/JPY was a mover today, working through resistance in the 77.4060 area, reaching 77.70 on short-covering. What can’t go down must go up…for a while.

USD/CHF rallied as high as 0.7990, testing the important zone of resistance around the 80 centime level before failing miserably. We fell back to 0.7930 late in the day as the topside threat faltered.

Blame risk aversion for the softer tone in the commodity currencies despite the firmer gold price.

Bernanke speaks at 14:00 GMT tomorrow, the highlight of the trading week. No hints at QE3 are expected beyond vague vows of “doing all that is necessary” to support the US economy. With Hurricane Irene bearing down on NY, expect the market to quickly square up once the bearded one ends his speech.