Market sentiment worsened on Tuesday after oil workers in Norway went on a strike. The threat of reduced supplies should have provoked an increase in oil prices, but the opposite happened. Brent fell by 17% from its peak on June 14 amid expectations of lower demand due to the likely onset of a recession.

Gas prices, on the other hand, reached a 4-month high in Europe because three fields were closed as a result of strikes. The overlap of the energy crisis may explain the more bearish mood, which also led to the decrease of euro by 1.5%.

In the US, two indicators point to a likely move towards recession. The ISM manufacturing index showed a sharp fall in the sub-index of new orders, while the inventory index remained elevated.

Another indicator is the Atlanta Fed's GDPNow index for the second quarter, which is currently at -2.1%. Of course, two consecutive quarters of negative growth don't always represent a recession, and to call one (especially in the US) also needs to see an increase in unemployment. Thus, the Fed is unlikely to fear negative growth for two quarters if labor market indicators remain low, as they are now. In this regard, the labor market data for June, which will be published on Friday, is of increased interest and may provoke high volatility if the final values show a noticeable deviation from the forecast.

Ahead is the ISM's data on the services sector, ADP national employment report and the US employment report, which will be the main drivers of the market.

USD/CAD

Although net long position increased by 389 million in the reporting week, CAD remains bearish because fears of a slowdown in demand for raw materials do not give commodity currencies a chance to strengthen. The settlement price also lags behind the spot price, which indicates some potential for a corrective decline.

USD/CAD's first attempt to overcome the resistance of 1.3076 failed, but there is every reason to believe that the second attempt will be successful. The chances of reaching 1.3320/40 have become much greater.

Last Monday, the Bank of Canada released its quarterly business outlook review, which noted that many businesses continue to raise wages to retain workers and expect strong price increases in the second half of the year. And since rising inflationary expectations reflect business fears that the risk of stagflation remains high, safe-haven assets will remain market favorites until the end of the week.

USD/JPY

Net long position in JPY increased by 523 million in the reporting week even though the Bank of Japan said it is not in a hurry to tighten monetary policy.

Perhaps, market speculators think otherwise and are preparing for the fact that the BoJ, as part of a global process, will join the pool of central banks tightening financial conditions. But until that happens, there is a risk that USD/JPY will continue to rise.

Mizuho Bank believes that even a rise in USD/JPY to 140 or inflation to 3% is not enough for the Bank of Japan to change its position, since such an approach leaves the BoJ vulnerable to the actions of speculators. The price stability target of 2% will remain the same regardless of whether inflation accelerates to 3% or even 4%, since the US inflation index has long exceeded all targets.