Action Insight

Yen remains generally weak today but it's weakest spot was overtaken by New Zealand Dollar. Meanwhile, Dollar, Euro and Sterling are staying in recently established range against each other. Economic calendar is rather light and traders are generally holding their bets ahead of the key events later this week. In particular, BoC rate hike tomorrow will catch as much attention as Fed chair Janet Yellen's testimony. Meanwhile, Euro could stay mixed until there are fresh inspirations about ECB's timing for tapering. In other markets, gold recovered ahead of 1200 handle but struggled to find follow through buying above 1210. WTI crude oil is trying to regain 45 after dipping through 44 last week.

The forex markets are generally staying in tight range today. Yen is attempting to extend recent down trend but momentum is relatively weak. In particular, USD/JPY is feeling a bit heavy ahead of 114.36 key medium term resistance level. Euro is firm as Sentix investor confidence stayed closed to 10 year high in July. But both Dollar and Sterling are mildly stronger and they pare some of last week's losses. Canadian Dollar is also in consolidation even though markets are expecting BoC to deliver a 25bps rate hike later in the week. In other markets, Gold dips to as low as 1204 and is held below 1210 handle so far. WTI crude oil is mildly lower at around 44.0.

Yen stays weak in an otherwise quiet start to the week. G20 meeting didn't give impact to the markets. Global leaders pledge to continue to "fight protectionism including all unfair trade practices" and "recognize the role of legitimate trade defense instruments in this regard." While leaders have taken note of US's withdrawal from the climate accord, all but US "agree that the Paris Agreement" is irreversible. Regarding migration, G20 somewhat toughen up and said that "we emphasize the sovereign right of states to manage and control their borders and in this regard to establish policies in their own national interests and national security, as well as the importance that repatriation and reintegration of migrants who are not eligible to remain be safe and humane."

Central bank comments and rate expectations continued to be the main drivers in the global financial markets last week. However, the developments reminded us that no matter how hawkish central bankers sound, monetary policies have to be supported by data. Canadian Dollar being an example that BoC Governor Stephen Poloz's hawkish comments were supported by strong employment data. And the Loonie ended as the strongest major currency as markets are generally expecting a BoC rate hike on July 12 this week. Dollar ended as the second strongest one after solid ISM indices and non-farm payroll headline number even though markets are not convinced of a September Fed hike. Meanwhile, Euro was the third strongest as markets perceived the ECB monetary policy meeting accounts as a hawkish one.

Dollar is quite unfancied by the stronger than expected headline non-farm payroll number. NFP showed 222k growth in June versus expectation of 173k. Prior month's figure was also revised up from 138k to 152k. However, unemployment rate rose 0.1% to 4.4%. And more importantly, average hourly earnings rose 0.2% mom versus expectation of 0.3% mom. Prior months wage growth was also revised down from 0.2% mom to 0.1% mom. EUR/USD spikes lower to 1.1388 but is quickly back at 1.1420. Nonetheless, USD/JPY is firm at around 113.70, but as supported by Yen's weakness.

Yen tumbles broadly as global bond rout continued and pushed yields higher again. German 10 year bund yields broke 0.5% level for the first time since January 2016. Meanwhile, US 10 year yield jumped to a near two month high and closed firmly at 2.37, up 0.036. The resumed selling in bonds were believed to be triggered by the hawkish ECB minutes which indicated the discussion of removing easing bias. Also, some believed that weak results of French 30 year bond-auction was another trigger. UD/JPY reaches as high as 113.83 as recent rise resumed. GBP/JPY also hits as high as 147.60. Meanwhile, EUR/JPY is even stronger and hits 129.91, set to take on 130 handle.

The minutes for the June ECB meeting turned out more hawkish than expected, sending EURUSD to a 3-day high of 1.1397 and Europe's Stoxx 600 stock index to a 11-week low 378.45. The minutes unveiled that policymakers had discussed removing the guidance on the bond asset purchase program (QE), if necessary. Policymakers just shrugged off recent weakness in headline inflation as core inflation continued to climb higher.

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.