• US weekly jobless claims rise to 472,000; worse than expected
  • ISM manufacturing index falls to 56.2 in June from 59.7 in May, weaker than expected
  • US pending home sales tumble 30% in May from April as home-buyers credit expires
  • US equities recoup most of big early losses, end 0.3% lower at 1027
  • US Treasury yields rebound after making new trend lows; end at 2.95% from 2.88% intraday
  • Gold tumbles $45, closes at $1197.50; oil falls $3.00 to $72.70

EUR/USD traded nearly vertically today, vaulting 1.2400 in early US trade and the important 1.2500 level late in the session. The roots of the rally aren’t exactly clear. The very well-entrenched correlation between the EUR and the S&P broke down utterly today. Whether the break is permanent or a temporary phenomenon, only time will tell.

Weak US data is usually associated with “risk off” but today we saw the reverse as the dollar fell across the board. The dollar index broke important technical support during the morning and the euro broke similar resistance near the close, suggesting a medium-term dollar top/EUR bottom is in place.

Some suggest hedge funds were forced out of EUR shorts and gold longs today to fund positions in other markets. Others suggest that despite seeming calm in European money markets as the LTRO expired today, tensions remain that forced banks to buy euros in the market that they are unable to borrow elsewhere. Others see weak US data as simply making the dollar a less appealing safe-haven from European woes and fears of a Chinese slowdown than previously, while austerity puts Europe in a better light. Choose you’re favorite ’cause I’m baffled. I vote none of the above.

USD/JPY fell as low as 86.95 after the US data but talk of very large bids from semi-official Japanese accounts as well as rumors of BOJ rate checking helped set off a short-covering bounce. A rebound in US yields also contributed to a recovery in USD/JPY as the day wore on. We end at 87.65. Sellers are seen at 87.95/00 and 88.20/25.

EUR/JPY made a double bottom around 107.30/50 and closes at 109.73, helping sustain the euro rally late in the day.

Cable rallied along with the EUR, reaching 1.5190 toward the close, a modest improvement on 1.5165 London highs. EUR/GBP rallied, slowing Cable’s recovery. It ends t 0.8250 from 0.8215 US lows.

Commodity currencies rallied but lagged the pace. Global growth fears are being fueled by the rapid US slowdown and fears China could follow suit. If the US and China slow, how will a debt laden Europe fare? Not good.

USD/CAD ends down at 1.0590 from 1.0660 highs after the ISM data. AUD is at 0.8435 after finding support at the 8350/55 area post-ISM.

Hedge funds were EUR/CHF buyers today, covering shorts. Some suspected the SNB was in as well, though it seems unlikely they’d want any more EUR/CHF, thank you. We did a 1.3230/1.34 moonshot at one point and end at 1.3270.