Asian Session Forex Recap – Jan. 18, 2016

  • AU MI inflation gauge: 0.1% vs. 0.1% previous
  • PBoC sets weaker yuan in USD/CNY fix for a seventh day in a row
  • PBoC to set RRR rules on offshore yuan banks
  • UK Rightmove house price index (0.5% vs. -1.1% previous)
  • AU new motor vehicle sales (-0.5% vs. 1.3% previous)
  • Japan revised industrial production clocks in at -0.9% vs. 1.4% expected, -1.0% initial reading
  • Japan tertiary industry activity down by 0.8% vs. -0.6% expected, 0.9% previous

Forex price action was as mixed as my laundry colors, as traders priced in worries over Iran’s oil hitting the markets and a few changes from the PBoC.

Major Events:

Iran re-enters oil market – Unless you’ve been too busy watching Oscar-nominated films, you should know that Iran’s oil-related sanctions were lifted over the weekend and its products are expected to flood (heh) the oil markets and worsen the supply glut. Not surprisingly, forex traders initially turned to lower-yielding currencies in anticipation of even lower oil prices.

PBoC changes – Over the weekend the People’s Bank of China (PBoC) announced that effective January 25, it would impose a required reserve ratio (RRR) for banks handling offshore yuan, a move that could give the central bank more control over offshore yuan activity.

Then, right before the market open the PBoC set the USD/CNY mid-point fix a couple of points lower and marked the seventh day in a row that it had strengthened its local currency. The Chinese markets cheered the moves with the Shanghai index trading 0.44% higher and Shenzhen’s CSI300 showing a 0.38% uptick.

Major Currency Movers:

USD – The low-yielding Greenback was one of the favorites throughout the session, thanks in part to oil concerns encouraging risk aversion.

The dollar gained against some of its major counterparts with EUR/USD falling by 36 pips (-0.33%); USD/JPY jumping by 33 pips (+0.28%), and USD/CHF rocketing by 43 pips (+0.43%).

CAD – You would think that with traders worried over Iran’s oil and oil prices falling further that the Loonie would crack under the pressure. Not this time! The oil-related currency actually GAINED across the board despite these concerns. Maybe a case of sell-the-rumor-buy-the-news?

USD/CAD fell by a whopping 87 pips (-0.60%) throughout the session while CAD/JPY saw a 70-pip jump. Even GBP/CAD fell by 95 pips (-0.46%) while EUR/CAD plunged by a ridiculous 146 pips (-0.91%).

Other comdolls – The Greenback had no game against the comdolls with the Aussie and Kiwi taking advantage of optimism over the PBoC’s recent moves.

AUD/USD popped up by 65 pips (+0.95%) while NZD/USD showed a 40-pip increase (+0.62%). AUD/JPY also rose by 99 pips (+1.24%) while NZD/JPY caught 68 pips (+0.91%).

Watch Out For:

  • 9:00 am GMT: Italian trade balance (expected to show 3.24B EUR surplus vs. 4.81B EUR figure in October)
  • Greece’s creditors scheduled to visit Athens to review its bailout program

See more:

U.S. Session Forex Recap

Bonnie and Clyde, peanut butter and jelly, Kanye West and Kanye West. Some things just go well together.

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