Action Insight

The Japanese stages a strong rally today, possibly in response to US President Donald Trump's comments about shutting the the government. Strength in Yen is particularly apparent against New Zealand as NZD/JPY dives through recent support at 79.07. USD/JPY is being rejected from 4 hour 55 EMA and is possibly now heading back to 108.59. But at same time, Euro also surges broadly after solid PMI data that suggests growth momentum to continue. EUR/GBP extends recent rally through 0.92 handle. EUR/USD is at this point, staying is recently established range but looks set to retest 1.1846 minor resistance again. It looks like the forex traders are getting a bit impatient waiting for Jackson Hole symposium.

Markets sentiments were given a strong boost as the US appears to be breaking the tax reform deadlock. DOW closed up 196.14 points or 0.90%. S&P 500 also rose 24.14 points or 0.00% to close at 2452.51. 10 year yield gained 0.035 to close at 2.215, back above 2.2 handle. The development also gave the greenback a mild lift but there dollar index is held well below key near term resistance at 94.28. In the currency markets, EUR/USD is considered as staying in consolidation from 1.1908 and near term up trend is expected to resume sooner or later. USD/JPY is staying below 110.94 and recent fall from 114.49 is expected to extend too. There is no clear evidence for a trend reversal in Dollar yet.

Speeches by ECB President Mario Draghi and Fed Chair Janet Yellen are the key focuses. The market is anticipating Draghi to give more hints on ECB's asset purchases tapering. However, an ECB spokesman indicated last week that Draghi would not deliver a new policy message, but focus on the symposium's theme of "Fostering a Dynamic Global Economy". We believe Draghi would refrain from sending more signals about the policy outlook this week as the ECB is still working on the new economic projections for the September meeting. It would be prudent to wait for the updated economic forecasts and make announcement thereafter.

Trading in the forex markets remain rather subdued today. Nonetheless, fresh selling is seen in Sterling in early US session. EUR/GBP is extending recent rally while GBP/USD also breaks 1.2830 minor support. At the same time, Canadian Dollar is given a boost from retail sales data. EUR/USD turns soft as Dollar recovers, after the pair failed to break out 1.1846 minor resistance. But overall, the markets are awaiting new trading theme and would probably need to wait till Jackson Hole Symposium on Thursday and Friday.

The forex markets are lacking clear direction so far this week. It feels there is a lack of interest among traders ahead of Jackson Hole symposium. Euro attempted to resume recent rally against Dollar. While EUR/USD takes out a near term channel resistance, it's staying below 1.1846 resistance. Thus, the consolidation from 1.1908 is likely still in progress. GBP/USD and USD/JPY are also staying in very tight range. Canadian dollar strengthens with very weak momentum but USD/CAD is still in progress for deeper decline. The economic calendar is relatively light today but Canadian retail sales could trigger firmer momentum in USD/CAD.

Euro is trying to reverse from initial dip today but buying is so far limited. Traders are getting cautious ahead of ECB President Mario Draghi's speech in the Jackson Hole symposium. There were media reports last week that Draghi won't delivery anything outside of the topic of the symposium, that is, "Fostering a Dynamic Global Economy". And it's also clear that ECB will wait for more economic data, especially on inflation, and discuss policy change in the September meeting. Hence, some analysts argue that Euro could indeed be lifted if Draghi meets this expectation by saying nothing. But of course, what Fed chair Janet Yellen delivers is another big factor for both Dollar and Euro. Markets are generally not convinced that Fed is going to hike again in December. The greenback could be given a lift instead and drag the Euro down if Yellen shows no concern over recent tame inflation reading.

Brexit negotiations return to the driver's seat as the third round of talks in phase one (withdrawal terms) is set to begin in the week of August 28. Last week, the government, facing criticisms of its lacking preparation, released the policy papers on future customs arrangements, and Northern Ireland and the border with Ireland. The UK's positions, in particular the customs arrangements, triggered criticisms and are expected to delay the completion of the first phase negotiation, limiting the time for the second phase (trade issues). British pound has remained under pressure recently, with GBPUSD hovering around a one-month low and EURGBP firming around the highest levels in 10 months.

The financial markets started the week relatively quietly. US and South Korea have kicked off the join annual military exercise today. North Korea warned that the drills would worsen the tensions by "throwing fuel on fire". But markets have little reaction to the news so far. Yen is trading mildly higher, possibly because of that, but strength is limited. On the other hand, European majors are broadly softer. The economic calendar is rather light today. UK Rightmove house price index dropped -0.9% mom in August. Japan all industry activity index rose 0.4% mom in June, in line with expectations. Canada wholesale sales is the only other notable featured data. Markets will have one eye on the developments in the White House, and another eye looking forward to Jackson Hole symposium later in the week.

Risk aversion was again the main theme in the financial markets last week. But this time, commodity currencies ended as the strongest ones. Sterling was hardest hit as disappointing inflation reading further killed the chance of an early BoE hike. Euro followed on report that ECB President Draghi won't address monetary policy in the upcoming Jackson Hole symposium this week. Also, the common currency was pressured as ECB minutes showed worries on Euro overshooting its strength. Dollar suffered much on the political turmoil in the White House but it ended slightly higher against most except Canadian Dollar and Australian Dollar. Meanwhile Yen and Swiss Franc failed to capitalize on risk aversion and ended the week mixed.

The financial markets some what stabilized mildly after the selloff triggered by the terrorist attack in Spain and drama in the White House. At the time of writing, FTSE is trading down -0.1% while DAX is down -0.4%. US futures point to a flat open. In the currency markets, Dollar is trading broadly down today, but for the week, it's still in black against Euro and Sterling. The Pound will most likely end the week as the weakest. Commodity currencies are holding the ground even though yen surged since yesterday. In particular, Canadian Dollar is helped by positive inflation data. In other markets, Gold finally takes out 1300 handle today as buying gains steam.

The Japanese Yen takes the driving seat on risk aversion again. The global financial markets are rocked by the deadly terrorist attack in Barcelona and extended turmoil in the US White House. DOW closed down -274.14 points or -1.24% at 21750.73, taken out near term support at 21842.74. Same picture is seen in S&P 500 as it lost -38.1% or -1.54% to close at 2430.01, also taken out near term support at 2437.75. Nikkei follow in Asian session and slumps to 3-month low, and is trading down -1.1% at the time of writing. In other markets, gold is firm above 1290 but yet to find follow through buying for 1300 handle. WTI crude oil is trying to regain 47 after extending recent decline to as low as 46.46.

ECB's July minutes voiced concerns over euro's strength. This is particularly important as the central bank is about to discuss tapering of the asset purchase program. Yet, the members generally agreed that "there was presently a continuing need for steady-handed and persistent monetary policy". The single currency instantly dropped to a 3-week low of 1.1661 against USD, 2-day low of 0.9061 against GBP and 4-day low of 1.1302 against CHF, before recovery.

Euro trades broadly lower today as ECB monetary policy meeting accounts show that policy makers are concerned with the currency's strength. Meanwhile, Dollar regains much ground against most currencies. Markets reassessed FOMC minutes released yesterday as saw them not as dovish as initially perceive. Overall, the forex markets are mixed with Aussie and Yen trading as the strongest ones at the same time. In other markets, Gold is staying firm above 1290 but lacks follow through buying for a take on 1300 handle yet. WTI crude oil is extending recent decline to as low as 46.46 so far.

Dollar was sold off overnight as FOMC minutes showed worries of members over inflation. Political drama in the White House also added some weight to the greenback. Notable strength is seen in the Japanese Yen in Asian session. But commodity currencies are generally the strongest ones over the week. Weakness in the greenback was accompanied by strength in bonds, where 10 year yield dropped -0.04 to close at 2.226. Gold rode the wave and is back above 1290 after dipping to as low as 1272.7. And Gold looks set to have another attempt on 1300. WTI crude oil, on the other hand, continues to suffer and dipped to as low as 467.67, extending the decline from recent high at 50.43.

The price actions in US dollar and Treasuries suggested that the market views the July FOMC minutes as a dovish one. The minutes revealed that policymakers were concerned that US inflation might stay below +2% longer than previously anticipated. On the other hand, it appears that an announcement on balance sheet policy is imminent. The market pricing of a rate hike in December ranges from 35-45%. It only expects less than two times of rate hike through end-2018, compared with four projected in the Fed’s dot plot. US dollar initially climbed higher upon release of the statement. Gains were, however, erased shortly with the DXY index ending the day -0.33% lower. Treasury prices strengthened, sending 2-year yields -3 points lower to 1.33% and 10-year yields -5 points to 2.23%.

Commodity currencies are the strongest performers today as lifted by firm risk appetite. European indices are trading in black while US futures point to higher open. Sterling is staging a relief recovery after solid job data. Euro, on the other hand, trades softer on report that ECB President Mario Draghi will not sign policy changes in the upcoming Jackson Hole conference. Yen and Swiss are also weak in risk seeking markets. Nonetheless, the greenback remains the strongest one for the week as markets await FOMC minutes.

Dollar pares back some gains today but remains the strongest one for the week. FOMC minutes will be a main focus for the day which could decide whether the greenback can extend its rebound. So far, technically, such rebound in Dollar doesn't warrant a trend reversal yet. For example, EUR/USD is held above 1.1688 minor support and well above 1.1606 fibonacci level. That is, EUR/USD's near term outlook remains bullish. USD/CHF is help below 0.9772 resistance and thus, not confirming resumption of rebound from 0.9473. AUD/USD is also held well above 0.7785 cluster support, and the pull back from 0.8065 is seen as a correction. The main exception is GBP/USD which is building up the case of bearish reversal, thanks to Sterling's own weakness.

Headline CPI in the UK surprisingly stayed unchanged at +2.6% y/y in July, compared with consensus of a renewed pick up to +2.7%. From a month ago, inflation contracted -0.1%, after a flat reading in June. Re-designated by the Statistics Authority on July 31, the consumer price index including owner occupiers' housing (CPIH) steadied at +2.6%. The price of motor fuel continued to fall and contributed to the biggest downward change from June to July. Upward contributions came from a range of goods and services, including clothing, household goods, gas and electricity, and food and non-alcoholic beverages. Core CPI stayed unchanged at +2.4%, missing market expectation of a rise to +2.5%.

Dollar is extending this week's rebound in early US session after a string of solid economic data. Meanwhile, Sterling is trading as one of the weakest after another CPI miss. From US, headline retail sales rose 0.6% in July versus expectation of 0.4%. Ex-auto sales rose 0.5% versus expectation of 0.3%. Empire state manufacturing jumped to 25.2 in August and beat expectation of 10.3%. Import price index rose 0.1% mom in July. Technically, GBP/USD's break of 1.2932 is seen as a key near term bearish signal and the pair is now heading back to 1.2588 support. USD/JPY's break of 110.62 resistance also is also taken as a sign of near term reversal. But for the moment, EUR/USD is holding well above 1.1606 and maintains bullish outlook.

Dollar trades notably higher against Japanese Yen and Swiss Franc as comments from a top Fed official revived the speculation of one more hike this year. On the background, risk aversion also receded as threat of imminent war between US and North Korea abated. DOW rebounded 0.62% to close at 21993.71. S&P 500 also gained 1.00% to close at 24.52. Sentiment in Asian session is also positive with Nikkei trading up 1.2% at the time of writing. While the greenback is trying to stage a general rebound, it should be noted that Euro is staying firm too. EUR/USD is bounded in range of 1.1688/1908, maintaining near term bullishness. Also, we don't see any solid buying to push Dollar index back above 94.28 key near term resistance yet.