Market Overview

Trading in the forex markets remain rather dull today. Dollar's recovery overnight again lack conviction. Nonetheless, USD/JPY does seem to have bottomed out, but that's mainly thanks to Yen's weakness. Canadian Dollar is bounded in range after the highly anticipated BoC rate hike. Traders are holding their bet on the Loonie after cautious tone of BoC. Sterling spiked higher through 1.3835 key resistance but there was no follow through buying. It'll take a little more time to see if that's bull trap. Australian Dollar doesn't get any lift by strong job data and is staying in consolidation.

Euro is trading generally lower today after some ECB officials expressed concerns over its recent appreciation against Dollar. The greenback is also trying to gain some footing as the steep broad based selloff is exhausted. But for the momentum, there is no confirmation of a turnaround in Dollar yet. At least, Dollar's recovery today is overwhelmed by the strength in Aussie and Kiwi. Canadian Dollar, on the other hand, remains in tight range as traders await BoC rate decision cautiously.

While the forex markets remained generally steady, stock traders experienced a roller coaster ride overnight. DOW surged in initial trading to as high as 26086.12 (up 283 pts) but reversed gain and closed down -0.04% at 25792.86. That's the biggest single day reversal since February 2016. Similarly, S&P 500 surged to 2807.54 but closed down -0.35%. 10 year yield was relatively steady, closed down just -0.008 at 2.544. TNX is still struggling to have the momentum to get through 2.621 key resistance. A factor is the concerns over government shutdown in the US. The Congress will need to pass a spending bill by the end of this week to avoid the shutdown and it's seen as a risk by many traders

The forex markets are generally trading within yesterday's range today as markets turn into consolidation mode. Dollar is trying to pare back some losses but there is no indication of bottoming yet. The greenback remains the weakest major currency for the week so far. Commodity currencies, in particular Aussie, stays strong. Elsewhere, markets are also in general risk seeking mode. At the time of writing, German DAX is up 0.95%, French CAC 40 is up 0.28%. FTSE 100 is nearly flat, though. US futures point to sharply higher open as markets come back from bank holiday. DOW would extend recent record run and would likely take on 26000 handle.

Dollar is mildly higher in Asian session, as it turns into consolidation after recent steep selloff. Among the mostly traded currencies, Australian Dollar is trading as the strongest one. That's partly supported by strength in China as the Shanghai SSE composite index, trading at 3420, is close to 2017 high at 3450. And break there will push the index into highest level since 2015. Meanwhile, Hong Kong HSI, as a proxy to China, is also close to the record high at 31958 made 10 years ago. Euro is trading as the second strongest as supported by hawkish comments from ECB officials. It seems now, after last week's December meeting minutes, ECB policymakers are starting to sing a chorus of ending asset purchases after September. As for today, UK inflation data will be a key event to watch.

Dollar continues to trade as the weakest major currency as another week starts. Over the month, the greenback is trading weakest against Kiwi and Aussie. Meanwhile, Euro is catching up as Germany is closer to reforming the grand coalition. Sterling follows on improving prospects of a favorable Brexit deal. For the moment, it's unclear which is the main driving force behind Dollar's selloff. The fact that other global central banks are catching up on tightening is a factor. Surge in commodity prices is another one. But these two factors are not strong enough to send the Dollar index to three year low. The concerns of China's consideration to move away from Dollar assets could be the more important reason.

EUR/USD powers through 1.21 handle today on new that German Chancellor Angela Merkel has achieved some breakthrough in forming the new coalition government. It's reported that Merkel has struck a deal with the Social Democrat to formally open talks for reforming the grand coalition. The marathon talks were closed with a 28-page blue print between the CDU/CSU and SPD. Close cooperation with France to strengthen the Eurozone is one of the key point of the blue print.

Risk appetite continued to be generally strong. DOW closed up 205.6 pts, or 0.81% overnight to 25574.73. S&P 500 and NASDAQ were up 0.7% and 0.8% respectively. All hit new record highs. Positive sentiments continue in Asian session with gains in China and HK markets even though Nikkei weakens mildly on recent Yen strength. WTI crude oil also extended recent rally to as high as 64.77 and is set to test 65 handle. Gold is firm, consolidation around 1320, as Dollar is back under pressure. The greenback will look into today's CPI reading for direction.

Aussie trades broadly higher in Asian session as lifted by retail sales data. While AUD/UD is still limited below 0.7896 key near term resistance, EUR/AUD has dipped through 1.5226 support, which signals more Aussie strength ahead. Over the week, Yen remains the strongest one on speculations of BoJ stimulus exit. Dollar suffered steep selling of talks that China will slow purchases of US assets. But still, the greenback in trading mixed, in red against Yen Aussie and Kiwi only.

Dollar dives broadly today on news that China is considering to diversify its foreign exchange reserves away from Dollar. It's reported by Bloomberg, without unnamed source, that Chinese officials are recommending the government to slow or even halt purchase of US treasuries. The China's State Administration of Foreign Exchange has yet provide a response to press query yet. But it's believed that the lowered attractiveness of US assets, as well as trade tensions between the two countries could be the reasons for the change in strategies.

Risk appetite remains strong in global financial markets. All three major US indices, DOW, S&P 500 and NASDAQ made record highs over night. Optimism carries on in Asian session. Even though Nikkei is trading a touch lower, stocks in China and Hong Kong are strong. The biggest surprise overnight was the surge in US treasury yields. 10 year yield close up 0.066 at 2.546. 2.621 key medium term resistance is now within reach. The development also helped lifting the dollar index back above 92.5. The greenback is probably finally preparing for a sustainable rebound.

Yen remains the strongest major currency for today as BoJ operates spurred speculations of stimulus exit. Dollar also follow closely as the second strongest one. On the other hand, European majors are under much selling pressure as recent rally fails to sustain momentum. Euro continue to shrug off positive economic data while EUR/USD's fall gathers steam. Elsewhere, commodity currencies are generally mixed. Speculations for a January BoC rate hike continue to grow. But Loonie's rally is looking stretched.

Yen strengthens against all major currencies in Asian session on news that BoJ lowers its long-dated JGB purchases. Strength in Yen is followed by Aussie, which is lifted by strong housing data. On the other hand, Dollar and Euro are both trading weakly. Comments from Fed officials overnight gave no extra confidence to the markets that Fed would hike three more times this year, not to mention four. Meanwhile, Euro stays soft as recent rally lost steam.

Despite a string of upbeat confidence data from Eurozone, Euro tumbles broadly today. Weaker than expected German retail sales could be a factor. Some also point to the risks of upcoming election in Italy. But it's seen that the decline in Euro is due to recent loss in momentum, and the failure of EUR/USD to break through 1.2091 key resistance. On the other hand, the greenback is trying to regain some ground, together with the Japanese Yen. BoC business outlook survey is the only economic release in US session. Focus will be on speeches of Fed officials including Atlanta Fed Raphael Bostic and San Francisco Fed John Williams.

Markets open another week rather steadily. Canadian Dollar remains the strongest one as supported by rate hike expectations. Dollar is trying to recover again, in particular as EUR/USD is feeling heavy ahead of 1.2091 key near term resistance. But more evidence is needed to confirm underlying strength in the greenback. Strong global risk appetite is keeping Yen and Swiss Franc soft. But Aussie is so far the weakest one after the government forecasts 20% drop in iron ore price this year.

Risk appetite dominated the markets last week and with global equities having a stellar start to 2018. With that, Japanese Yen and Swiss France ended as the two weakest ones. Dollar attempted to rebound multiple times but failed. Non-farm payrolls data were solid even though the headline number missed expectations. But it nonetheless gives no push for Fed to quicken it's rate path. Euro was also relatively firm throughout the week, until data showed headline and core inflation slowed in December. Sustainable strength was seen in commodity currencies. In particular, Canadian Dollar ended as the star as double boosted by strong job data and surge in oil price.

Canadian dollar soars in early US session after another month of stellar job data. The employment market grew and impressive 78.6k in December, just slightly smaller than prior month's 79.5k. It's also well above expectation of 0k growth. Unemployment ate, dropped to 5.7%, down from 5.9% and was way below expectation of 6.0%. That's also the lowest level in more than four decades, since the series began in 1976. The strength in job market is sealing the deal for BoC to hike again in Q1. And there could be more speculations for a January hike ahead. USD/CAD dives through 1.2380 handle, comparing to 1.2500 just an hour ago. Also from Canada, trade deficit came in larger than expected at CAD -2.5b in November.

Japanese Yen and Swiss Franc are trading as the weakest major currencies for the week on strong global risk appetite. Nikkei is extending recent rally in Asian session, after hitting 26 year high yesterday. DOW, S&P 500 and NASDAQ also closed at record highs again overnight, following the record high in FTSE. Commodity currencies and Euro are the main beneficiary in the current market sentiments. Dollar, on the other hand, stays generally weak except versus Yen and Franc. Non-farm payroll report, in particular wage data, will be key to whether the greenback can stage a turnaround. In addition, Canadian job data and Eurozone CPI will also be closely watched.

The pattern continues today with Dollar trying to recovery but fails. Economic data from US are solid but that gives little support to the greenback. Instead, Euro shines today as PMI data confirmed a "stellar" end to 2017, as the best year for over a decade. Released from US, ADP report showed 250k growth in private sector jobs in December, above expectation of 190k. Initial claims rose 5k to 250k in the week ended December. Challenger report showed -3.6% yoy fall in planned layoffs in December. From Canada, IPPI rose 1.4% mom in November. RMPI rose 5.5% mom.

US equities ended broadly higher overnight as boosted by tax cuts optimism. DOW gained 0.40% to 24922.68 and 25000 handle is within reach. S&P 500 closed solidly above 2700 handle at 2713.06, up 0.64%. NASDAQ also rose 0.84% to 7065.53. All three indices were at records. Nikkei follows today and surges close to over 2.6% through 23300. Dollar was also lifted by Fed officials's discussion that tax cuts could prompt faster rate hike. But for the moment, the greenback is still traded in red against all but Swiss Franc for the week. More support is needed from economic data, possibly non-farm payroll and wage growth, to give the greenback a turnaround.