Market Overview

Canadian Dollar suffers steep selling today as US President Donald Trump singles out Canada and Mexico in his trade war rhetorics. He said in a tweet that "NAFTA, which is under renegotiation right now, has been a bad deal for U.S.A. Massive relocation of companies & jobs." And, "tariffs...

The forex markets are pretty steady in Asian session as an extremely busy week starts. Reactions to Italy election and Germany SPD vote on grand coalition were muted. Euro remains steady so far, staying as the second strongest major currency for the month after Yen. Canadian Dollar and Australian...

The theme of trade wars overwhelmed the global financial markets last week and overshadowed any other topics. It started on news that US President Donald Trump is going to impose tariffs of 25% on steel and 10% on aluminum. Trump then doubled down by tweeting "trade wars...

Risk aversion continues to be the main theme today as US President Donald Trump declared that trade wars are good. At the time of writing, German DAX is trading down -2.2%, French CAC down -1.9% and UK FTSE down -1.1%. That follows -2.5% decline in Japanese Nikkei. US futures are pointing to triple digit decline in DOW at open. In the currency markets, Dollar is suffering steep selling against Euro, Yen and Swiss Franc. Nonetheless, commodity currencies are even weaker with Canadian Dollar leading the way down.

The broader markets responded very negatively to US President Donald Trump's push for steel and aluminum import tariffs. DOW closed down -420 pts or -1.68% at 24608.98, breaking key near term support at 24792.99. S&P 500 lost -36.16 pts or -1.33% to close at 2677.67, breaking equivalent support at 2697.77. NASDAQ, the relatively stronger one recently, also dropped -92.45 pts or -1.27% to close at 7180.56, confirming failure below 7505.77 record high. Treasury yields also suffered with 10 year yield dropping -0.064 to 2.80. It looks like TNX has already topped below 3% handle. Asian markets follow with Nikkei losing over -500 pts or -2.3% at the time of writing. Hong Kong HSI is down -430 pts or -1.4%.

Dollar is trying to ride on strong job data to extend recent rally. Initial jobless claims dropped 10k to 210k, lower than expectation of 226k. That's the lowest level in nearly five decades since December 1969. Four week moving average dropped to 220.5k, also the lowest since 1969. Continuing claims rose 57k to 1.93m in the week ended February 17. Personal income rose 0.4% in January, above expectation of 0.3%. Personal spending rose 0.2%, in line with expectation. Headline PCE was unchanged at 1.7% yoy, core PCE unchanged at 1.5% yoy. Both met expectation. Also released, Canada current account deficit narrowed to CAD -16.4b in Q4. Focus will turn to round two of Fed Chair Jerome Powell's testimony.

Yen overtakes Dollar as the strongest major currency for the week so far as helped by risk aversion. DOW dropped -380.83 or -1.5% overnight to close at 25022.42. That also marked the first monthly decline after a 10 month winning streak. All markets will turn their focus to round two of Fed Chair Jerome Powell's Congressional testimony. But seen as being a straight forward person, he's not expected to alter his messages that rocked the markets two days ago.

Sterling is trading as the weakest major currency today. Fresh selling is seen on strong comments from EU Brexit negotiator Michel Barnier. That came as European commission published its own draft Brexit withdrawal treaty. The document highlighted, in Barnier's words "significant divergences" between UK and EU. Yen is trading as the strongest for the day, thanks to risk aversion. But Dollar is still the strongest for the week. The greenback was boosted by upbeat comments from Fed Chair Jerome Powell. Technically, EUR/USD is now finally pressing trend defining 1.2205 key support. This level will be the major focus in US session.

The initial response to Jerome Powell's first Congressional Testimony as Fed Chair was muted as his prepared speech provided nothing new. Nonetheless, stocks tumbled while Dollar surged as Powell offered an upbeat outlook in his Q&A. There are notable increase in chance of continuous rate hikes towards the end of the year as indicated by fed fund futures. DOW ended down -299.24 pts or -1.16% at 25410.03. S&P 500 dropped -35.32 pts or -1.27% to close at 2744.28. 10 year yield regained 2.9 handle by rising 0.049 to 2.908. Dollar index jumped to as high as 90.49 and is heading back towards 91.01 key structural resistance.

Dollar strengthens on Fed chair Jerome Powell's prepared remarks for his first Congressional testimony. But the movements in the markets are slight. The markets are generally staying in consolidation mode. Indeed, Powell offered nothing new comparing to the Fed's Monetary Policy Report released last week. Elsewhere, the Swiss Franc is trading as the strongest today while commodity currencies and Sterling are soft. Overall, the currency markets are quiet.

Risk sentiments are generally positive this week so far. DOW gained 399.28 pts or 1.58% to close at 25709.27 overnight. The rebound from 23360.29 resumed with solid momentum and is set to extend to retest 26616.71 record high. Comparatively, NASADAQ was even strongly, up 11.15% to 7421.46, just inches below 7500.61 record high. Asian markets follow with Nikkei trading up over 300 pts, or 1.4%, at the time of writing. Pull back in treasury yields was a factor helping stocks as 10 year yield dipped -0.012 to 2.859 after recent rally lost momentum. The currency markets are mixed though, with major pairs and crosses stuck in range. Euro is mildly firmly against the others but there is no clear momentum.

The forex markets are, generally speaking, rather quiet today. Dollar remains generally soft but no follow through selling is seen against it. Indeed, the greenback is trading mildly higher in the last few hours as consolidative trading extends. Canadian Dollar is the weakest one as weighed down by uncertainties over NAFTA renegotiations. Sterling takes over from Aussie and Kiwi as the strongest one for today but it's also bounded in recent range. The markets may continue to tread water until the batch of economic data and Fed Chair Jerome Powell's testimony tomorrow.

Dollar weakens broadly as another week starts rather quietly. On the other hand, Aussie and Kiwi stage a strong come back. Canadian Dollar doesn't follow as weighed down by concerns over the NAFTA talks that resumed this week. Euro is also mildly softer ahead of Italy election and outcome of German SPD vote on grand coalition this weekend. Technically, as noted before, dollar remains limited comfortably below near term resistance against others. It remains to be seen whether new Fed chair Jerome Powell's testimony would make or break the greenback.

Dollar ended last week as the strongest major currency Fed communications solidified the case for three hikes this year. Nonetheless, as pointed out a few times, the greenback was held below key near term resistance levels against others and there is no change in its bearish outlook yet....

Canadian Dollar rebounds in early US session after stronger than expected inflation data. CPI rose 0.7% mom, 1.7% yoy in January. The annual rate slowed from 1.9% yoy in December but beat expectation of 1.5% yoy. CPI core common accelerated to 1.8% yoy, up from 1.6% yoy. CPI core median was unchanged at 1.9% yoy. CPI core trim slowed to 1.8% yoy, down from 1.9% yoy. Canadian Dollar is now trading as the strongest one for today, and reversed some of earlier losses and be mixed for the week. Elsewhere in the forex markets, Dollar remains the strongest one for the week, followed by Sterling. Kiwi and Aussie are the weakest ones.

Outlook in the forex markets remain basically unchanged. Dollar is trading as the strongest major currency for the week. However, it remains bounded in recent range against others. Current rebound is viewed as a corrective move and there is no change in the bearish down trend yet. Yen and Sterling are following as the second and third strongest. Meanwhile, commodity currencies are trading broadly lower. In particular, Canadian Dollar is broadly pressured after yesterday's weak retail sales data. The loonie will turn to CPI release today for more guidance.

Canadian Dollar drops sharply in early US session after terrible weak retail sales data. Headline retail sales dropped -0.8% mom in December versus expectation of -0.1%. Ex-auto sales were even worse by dropping -1.8% mom, versus expectation of 0.0%. On the other hand, Dollar continues to struggle to extend post FOMC minutes gains despite solid job data. Initial jobless claims dropped -7k to 222k in the week ended February 17. Continuing claims dropped -73k to 1.88m in the week ended February 10. USD/CAD jumps after the releases and is on course towards 1.29 near term resistance zone. However, Dollar is staying below near term resistance against other major currencies, thus, maintaining bearish outlook.

Dollar jumps overnight after hawkish FOMC minutes and remains the strongest one for the week. Nonetheless, the greenback is paring some gains in Asian session. And it's still limited below key near term resistance against most major currencies, except versus Canadian Dollar. Markets sentiment have shifted much since the start of the year. Back then, most doubted whether Fed would really hike three times this year. After a string of solid data and yesterday's minutes, traders are now talking whether Fed could hike more than four times. US treasury jumped on such expectations while stocks reversed some of recent rebound. DOW ended the day down -0.67% at 2479.78. For now, it remains to be seen whether Dollar would finally re-couple with yields.

Dollar stays firm and is trading broadly higher going into US session. FOMC minutes will be closely watched later in the session. But it's unsure how much boost the hawkish Fed could give Dollar. For the moment, the greenback is staying below near term trend definite resistance against all other major currencies despite this week's rebound. That is, Dollar remains in down trend and the rebound is viewed as a correction only. Elsewhere in the currency markets, Sterling is trading broadly lower as job data showed first rise in unemployment rate since 2016. Wage growth met expectation but stayed below inflation.

Dollar's rebound extends further in Asian session today. Momentum is starting to looking promising. But technically, there is still no confirmation of reversal yet. At the time of writing, EUR/USD is held well above 1.2205 key near term support. USD/JPY stays below 108.27 near term resistance. The greenback will look further to FOMC minutes to be released later today. Elsewhere in the currency markets, Euro and Sterling are following Dollar as the strongest ones for today. Aussie and Yen are broadly lower.