Action Insight

Dollar ended the week as a big loser after the highly anticipated Jackson Hole Symposium. It was pointed out before that there were little expectations for comments on monetary policies from Fed Chair Janet Yellen and ECB President Mario Draghi. And the reactions indeed showed that traders were relieved by the lack on cover on monetary policies. And business returned to usual with EUR/USD resuming recent up trend while Dollar was back under pressure. While Dollar still managed to end higher against Yen, near term outlook remained bearish in USD/JPY and it's just a matter of time to see downside breakout in the pair. Focus will now turn to key economic data including non-farm payroll from US but it's unlikely to safe the Dollar. Another focus to watch this week is another round of Brexit negotiation.

Trading remains relatively subdued as markets await speeches of Fed chair Janet Yellen and ECB President Mario Draghi at Jackson Hole symposium today. Yen is trading generally lower following mild come back in risk appetite. Major European indices are in positive zone while US futures point to higher open. On the other hand, dollar is trading broadly lower as comments from Fed officials in the symposium continue to show division on views on December hike. Sterling is trading mildly higher today but remains one of the weakest over the week. Released in US, durable goods orders dropped -6.8% in July, below expectation of -5.8%. Ex-transport orders, however, rose 0.5%, above expectation of 0.4%.

The financial markets are generally holding their breath as speeches of Fed Chair Janet Yellen and ECB President Mario Draghi at the Jackson Hole Symposiums are awaited. The occasion is seen in recent years as a platform to launch monetary policy shifts. But this time, neither Yellen nor Draghi is expected to deliver anything drastic regarding monetary policy in near term. At the same time, this could also be Yellen's last address at Jackson Hole since it's uncertain whether she will be granted another term by US President Donald Trump, after the current one expires in February. Yellen might make use of the speech on financial stability to lay down from ground work for the future and leave some legacy.

After breaking several technical levels, New Zealand dollar looks vulnerable to further fall against both Australian dollar and US dollar. We believe the selloff over the past few days is driven by several factors, including weakness in soft commodity prices, unwinding of net speculative long positions, government's GDP growth downgrade and uncertainty in the upcoming parliamentary election.

The markets are lacking a clear direction for the moment as traders await the highly anticipated Jackson Hole symposium of global central bankers. Sterling is the notably weaker one this week but there is no follow through selling seen today. The pound is trying to recovery against Dollar, Euro as well as Yen. EUR/USD is still staying in range below 1.1908 as recent consolidation extends. Some strength is seen in Canadian Dollar today as USD/CAD dips through 1.2525 temporary low. That could be thanks to WTI oil's recovery back above 48. Gold is also hovering in tight range below 1300.

While markets are awaiting speeches of Fed Chair Janet Yellen and ECB President Mario Draghi in the annual Jackson Hole symposium, they are unsettled by US President Donald Trump's comments on shutting the government. DOW gave up some of the gains on revived hope on tax reform and closed down -87.8 pts or -0.40% at 21812.09. S&P 500 dropped -8.47 pts or -0.35% to close at 2444.04. Dollar index is heading back to 93 handle and is kept well below near term resistance at 94.28, and thus maintaining bearishness. More notable movement is seen in 30 year yield which recent recent fall and closed down -0.04 at 2.749. 10 year yield also lost 0.044 to close at 2.171 but it kept above last week's low at 2.163. In the currency markets, Sterling and Kiwi are trading as the weakest one for the week and there is no sign of a rebound.

Recent comments from US Treasury Secretary Steven Mnuchin and Senate Majority Leader Mitch McConnell appeared to have lifted market confidence that the government will eventually be able to raise the debt ceiling and avoid default. While our base case is that a debt ceiling would be suspended or raised, and the government would avoid a shutdown, we do not expect things to go smoothly and it would likely be a last-minute deal. US' politics has been under the spotlight since Donald Trump has become the president. At over 200 days in office, Trump's Russia scandal probably caught most attention, followed by the war of words with North Korean leader Kim Jongun. More recently, Trump dissolved several business advisory councils after resignations of a number of CEOs. On economic achievement, Trump has failed to pass the healthcare reform bill and was unable to kick start any pro-growth or tax policy. The government's debt issue is close watched and volatility of the stock markets could increase as we approach the deadline.

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.