Action Insight

Dollar is under some pressure in early US session after disappointing job data. On the other hand, Euro surged broadly as market perceived the ECB monetary policy account as a hawkish one. US ADP employment report showed 158k growth in private sector jobs in June, below expectation of 180k. Prior month's figure was revised down to 230k, from 253k. Initial jobless claims rose 4k to 248k in the week ended July 1, versus consensus of 243k. The number, nonetheless, remain historically low and stayed below 300k handle for the 122 straight weeks. Continuing claims rose 11k to 1.96m in the week ended June 24, staying below 2m for 12 straight weeks. Also released in early US session, US trade deficit narrowed to USD -46.5b in May. Canada trade deficit widened to CAD -1.1b in May. Canada building permits rose 8.9% mom in May.

Dollar and Canadian Dollar remain the strongest major currencies for the week, but both are losing momentum. Markets are rather unmoved by the highly anticipated FOMC minutes released overnight. DOW closed down -0.01% t 21478.17 after struggling in tight range for all the session. S&P 500 closed up 0.15% at 2432.54. NSADAQ is the more vulnerable one even though it closed up 0.67% at 6150.86. 10 year yield edged higher to 2.357 but failed to extend recent gain and closed down -0.012 at 2.334. In other markets, gold is trying to stabilize 1225 after diving to as low as 1216.5 earlier this week. WTI crude oil suffered steep selloff yesterday, from 47.3 to 44.51 and is now at around 45.3. The selloff in oil price accompanied the pull back in Canadian Dollar.

The FOMC minutes for the June meeting unveiled that members were divided over the timing of balance sheet reduction while there was also discussion over the recent inflation weakness. At the meeting, the Fed raised its policy rate, by +25 bps, to a target range of 1-1.25%.Given the fact that the economic and medium-term inflation outlooks was largely unchanged since May, members generally judged that it was appropriate to adopt the continued removal of monetary policy accommodation. The rate hike decision was not unanimous.

Dollar's rebound extends today as markets are awaiting FOMC minutes. The key to watch is any hint on the next move of Fed. That is, whether Fed will hike rates in September and start shrinking the balance in December, or reverse. Or, Fed would indeed do nothing in September. Currently, fed fund futures are pricing in less than 20% chance of a September hike. Also, odds for federal fund rates to hit 1.25-1.50% and above in December is less than 60%. Technically, the greenback is staying near term bullish against Yen. But Dollar is holding below near term resistance against Euro, Sterling, Aussie and Canadian, and stays bearish.

Dollar recovers this week but momentum isn't too strong so far. Indeed, the greenback is overwhelmed by the strength in Canadian Dollar, which follows high oil prices and hawkish BoC comments. Dollar is still holding well below near term resistance against Euro, Pound and even Aussie, and maintains bearishness. Meanwhile, Yen also tried to recover on news of geopolitical tensions in Korea but no follow through buying is seen. US markets will be back from holiday today with major focus on FOMC minutes. Sterling will look into PMI services for inspirations.

Yen rebounds strongly in Asian session today following steep in decline in China and Hong Kong stocks markets. In particular, the HK HSI is trading down -400 pts, or -1.5% at the time of writing, led by tech titan Tencent and casino stocks. Some attributes the selloff to North Korea's firing of another ballistic missile just ahead of July 4. That drew response from US President Donald Trump, with his tweet that "hard to believe that South Korea and Japan will put up with this much longer". And Trump tried to shift the spot to China again saying that "perhaps China will put a heavy move on North Korea and end this nonsense once and for all!" USD/JPY is back below 113 after surging to 113.46 overnight following the stronger than expected ISM manufacturing data.

RBA left the cash rate unchanged at 1.5% in June. While the decision had been widely anticipated, Aussie slumped after the announcement as the central bank failed to deliver a more hawkish tone as its US and European counterparts did. Policymakers affirmed that Australian economy would continue to grow gradually. Yet, they pointed to the strength in Australian dollar and subdue inflation as key reasons for standing on the sideline. Meanwhile, RBA remained concerned over the overheating housing market.

Trading remains rather subdued in the forex markets today. Dollar is trying to regain some ground after last week's steep selloff. The stronger than expected ISM manufacturing is giving the greenback extra fuel. But the recovery looks nothing more than a recovery so far, except versus Yen. Sterling is also under some pressure after PMI disappointment. But loss is limited. Yen, on the other hand, is trading weakly, in particular to greenback, despite an upbeat Tankan report. The biggest news from Japan was the humiliating defeat of Prime Minister Shinzo Abe's fulling LDP in Tokyo's local election. Meanwhile, Canadian Dollar is staying firmly in tight range as WTI crude oil is extending it's rebound to as high as 46.65.

The forex markets open the week rather steadily. Dollar recovers as it's digesting last week's steep selloff. The greenback will look into the key events including ISM indices, NFP and FOMC minutes for reasons to rebound. On the other hand, there are important economic data from UK and Canada, as well as ECB accounts that could trigger further rises in respective currency. Meanwhile, additional focus will also be on whether the selloff in global equities last week would extend. It isn't too bad at the timing of writing as Nikkei is trading up 0.28%, above 20000 handle. An eye will also be on oil price while WTI is consolidating above 46 handle, looking for strength to extend the rebound in the last two weeks.

Sterling, Canadian Dollar and Euro surged broadly last week on hawkish comments from central bankers. The turn in BoE Governor Mark Carney was the most drastic as just a week a go, he said it's not the time of rate hike yet. But then, he indciated the BoE MPC will start debating raising interest rate in the coming months. BoC Governor Stephen Poloz repeated his comments that prior rate cuts in 2015 have already done their job. But this time, Poloz hinted that BoC is approaching a new interest rate decision. That tremendously raised the odds of a July hike by BoC. There were some jitters on Euro on report that markets misinterpreted ECB President Mario Draghi's comments. But after all, it's generally convinced that, with improvements in Eurozone inflation and growth, ECB is transiting into a phase of stimulus withdrawal. And there would likely be tapering announcement in September or by latest October.

The forex markets are turning into profit taking consolidation mode as the half year end approaches. News from Eurozone are generally positive but the common currency pares back some of this week's sharp gain against Dollar and Yen. One the other hand, Canadian Dollar is still working hard to break through 1.3 handle against Dollar, following the rebound in oil prices. The Loonie is set to end June as the strongest one, followed by Aussie and than Kiwi. While Sterling surges this week on hawkish BoE turn, it's yet to recover the post UK election lost and would end as the third weakest one for the month, following Dollar and then Yen.

Global equities tumbled broadly while treasury yields surged as investors are preparing themselves to enter into an era of monetary stimulus removal. DOW lost -0.78% to close at 21287.03, S&P 500 down -0.86% to 2419.70, and NASDAQ dropped -1.44% to 6144.35. That was preceded by the -0.51% fall in FTSE, -1.83% fall in DAX and -1.88% fall in CAC. US 10 year yields followed global yields higher and closed up 0.046 at 2.267, breaking 2.229 near term resistance. In Asian markets, Nikkei followed by losing -1.06% to 20006.88, just barely hold on to 20000 handle. In currency markets, Yen and Dollar recovered mildly but are still set to end the week as the weakest major currencies. Sterling, Canadian and Euro remained the strongest ones and supported by respective hawkish central banks.

While yen's free fall continues in early US session, Dollar stabilizes mildly. Economic data from US are supportive. Initial jobless claims rose 2k to 244k in the week ended June 24. That's the 121 straight week of sub-300k reading. Four week moving average dropped 2.75k to 242.25k. Continuing claims rose 6k to 1.948m in the week ended June 17. It stayed below 2m mark for 11 straight week. Q1 GDP growth was revised up to 1.4% annualized, from 1.2% annualized. GDP price index was revised down to 1.9%, from 2.2%. Overall, there is no sign in bottoming in the greenback yet and it's still vulnerable to further selloff against Euro, Sterling, Franc, Canadian and Australian. For the week so far, Sterling is the strongest, followed by Euro and then Canadian.

Sterling and Canadian Dollar jumped sharply overnight as comments from BoE Governor Mark Carney and BoC Governor Poloz hinted at rate hikes ahead. Canadian Dollar is additional supported by the rebound in oil price, which sees WTI breaching 45 handle. Euro suffered some jitters on report that markets misjudged ECB President Mario Draghi's hawkish comments. But traders quickly turned to the bigger picture that ECB is, nonetheless, in a transition phase into stimulus removal. Euro remains the strongest major currency for the week, followed by Sterling and Canadian Dollar. On the other hand, the Japanese Yen is trading as the weakest as BoJ is expected to maintain stimulus. Dollar follows as markets are in doubt whether Fed will hike again in September.

Euro retreats sharply on report that markets has overreacted to ECB President Draghi's comment yesterday. Bloomberg quoted unnamed source saying that Draghi's comments were intended to strike a balance between recognizing Eurozone's strength while maintaining that policy accommodation is still needed. In particular, the reactions were hyper sensitive to Draghi's comment that "the threat of deflation is gone and reflationary forces are at play". EUR/USD hits as high as 1.1387 earlier today but is now back at 1.1330 after breaching 1.13 handle briefly. EUR/GBP also breached 0.8851/8865 key resistance zone earlier today but is back at 0.8830. Meanwhile, the development also triggered recovery in USD/CHF to as high as 0.9646.

Euro soared overnight as propelled by comments from ECB President Mario Draghi, taking out key resistance levels against Dollar and Yen. The common currency remains firm in Asian session. On the other hand, Dollar and Yen are trading among the weakest ones. The greenback is additional pressured, together with US stocks, as delay in healthcare vote in Senate again raised questions on US President Donald Trump's ability to push through economic agenda. Draghi's comment also pushed German bond yields higher, which was then followed in US bond markets. Yen suffered deeply with the rebound in bond yields. Meanwhile, Canadian Dollar is helped by the rebound in oil prices, partly thanks to the decline in Dollar. WTI crude oil is back above 44 even though there is no clear momentum to regain 45 handle yet. Gold is back above 1250, also as a reaction to Dollar selloff.

Euro surges sharply today on optimistic comments from ECB President Mario Draghi, who also hints at policy tweaks ahead. EUR/USD jumps through 1.28 level and is now having key resistance at 1.1298 in sight. EUR/JPY resumes larger rise from April low at 114.84 and takes out 126.09 key resistance. EUR/GBP is also having focus back on 0.8851/65 key resistance zone and could be resuming larger rise from 0.8312. Meanwhile, Yen remains the weakest one as broad based selloff continues. Strength in Euro is now making dollar vunlerable to downside breakout against Swiss Franc and Canadian Dollar.

The developments in the forex markets look as if traders are in risk seeking mode. Commodity currencies including Canadian Dollar, Australian Dollar and New Zealand Dollar trade broadly higher since the start of the week. Meanwhile, Japanese Yen and Swiss Franc are the weakest ones. However, this picture is not reflected in other markets. DOW jumped to to 21506.21 overnight but failed to break recent historical high at 21503.03. The index closed up just 0.07% at 21409.55 after paring initial gains. S&P 500 also rose a mere 0.03% to close at 2439.07. But NASDAQ lost -0.29% to close at 6247.15.

Dollar trades broadly lower today after weaker than expected economic data. Hawkish comments from Fed officials provide little support to the greenback. On the other hand, Canadian Dollar jumps as oil prices rebound. Sterling follows and is lifted broadly by political news in UK. Euro is supported by sentiments data which saw German Ifo hits record high. The greenback is only performing better than Japanese Yen and Swiss Franc. Released from US, durable goods orders dropped -1.1% in May versus expectation of -0.6%. Ex-transport orders rose 0.1% versus expectation of 0.4%.

Yen weakness broadly today as market sentiments improved. Major European indices open higher with FTSE and DAX up 0.5% at the time of writing while CAC is up 0.8%. The development is helped by recovery in oil prices as WTI is trading back above 43 after dipping to as low as 42.05 last week. Swiss Franc also follow Yen and trades mildly lower. Strength is seen in Sterling and commodity currencies but upside is limited so far. Gold, on the other hand, suffered steep selling to as low as 1236.5 earlier today and is back at 1244.