Asian Session Forex Recap – Dec. 1, 2016

  • AU AIG manufacturing index up from 50.9 to 54.2
  • Australia’s private capital expenditure down by 4.0% in Q3 2016 vs. 2.8% decline expected, 5.1% drop in Q2
  • Japan’s final manufacturing PMI up from 51.1 to 51.3 in November
  • China’s manufacturing PMI up from 51.2 to 51.7 in November vs. 51.0 expected
  • China’s non-manufacturing PMI pops up from 54.0 to 54.7 in November
  • China’s Caixin manufacturing PMI down from 51.2 to 50.9 in November
  • AU commodity prices up from 15.3% to 32.1% in November

Forex price action was a mixed bag of nuts, as risk-taking got mixed in with a bit of profit-taking ahead of this week’s other major reports.

Major Events:

OPEC-induced rally continues – Asian session traders continued to feel the buzz from yesterday’s OPEC meeting. As mentioned in my U.S. session recap, the world’s largest oil players have agreed to reduce their monthly production for six months starting next year.

Not surprisingly, oil prices jumped much higher at the release of the much-awaited news. Energy-related stocks also had a good day, though the rest of the U.S. and European bourses weren’t far behind. Asian session traders mirrored the optimism with energy-related companies making it rain and most of the Asian bourses also closing in the green.

Brent crude oil is up by another 1.35% to $52.52 while U.S. crude oil prices shot up by another 1.33% to $50.11. Meanwhile Australia’s A SX 200 is up by another 1.10%, Hang Seng is up by 0.71%, the Shanghai index is up by 0.45%, and the Nikkei is up by 1.05%.

China’s PMI reports – While OPEC’s historic deal may enjoy its spotlight for a while yet, other traders have already taken note of PMI reports from the world’s second largest economy.

The official manufacturing PMI, which measures large state-owned factories, expanded by 51.7 in November. This matches July 2014’s reading, which is also the highest since April 2012. Even the services sector showed improvement, with the non-manufacturing PMI clocking in at 54.7 from October’s 54.0 figure.

Meanwhile the Caixin PMI, which focuses on mid-sized companies, beat analyst estimates but still came in at 50.9, lower than October’s 51.2 reading. Overall, the data printed earlier today painted a more stable economic picture for China after being buoyed by government infrastructure spending and China’s housing boom.

China’s new restrictions on gold, yuan transfers – In an effort to control capital outflow, the People’s Bank of China (PBoC) has rolled out new guidelines regarding gold and yuan activities.

According to Reuters, Chinese firms lending out yuan-denominated loans to foreign borrowers are now required to register the loan to the State Administration of Foreign Exchange (SAFE) – the foreign exchange regulator – and must keep the loan within a certain limit. What’s more, only firms that have been established for a year are allowed to give overseas loans.

Meanwhile banks are having more trouble obtaining approvals to import gold. This is after quotas for importing gold have already been cut during the government’s last quarterly assessment and banks are already dealing with limits on their dollar-denominated transactions. It also didn’t help that the dollar’s recent strength has made gold-buying more attractive.

Remember that the yellow metal is one of the go-to assets of traders in times of risk aversion. In this case, buying gold is just another way for the Chinese to get rapidly depreciating yuans off their hands.

Major Market Movers:

JPY – Yen crosses started the session on a strong note, but a bit of risk aversion and profit-taking took its toll and dragged them lower.

USD/JPY hit a high of 114.84 before closing at 114.24, EUR/JPY shot up to 121.57 before levelling off at 121.10, and GBP/JPY reached a high of 143.71 before closing at 143.09.

AUD – The Aussie got a small boost from China’s better-than-expected PMI reports. After all, China is Australia’s largest trading partner and any good news for China is good news for Australia’s economy.

AUD/USD jumped by 13 pips (+0.18%) to .7403, EUR/AUD slipped by 24 pips (-0.17%) to 1.4318, and AUD/JPY inched 12 pips higher (+0.14%) to 84.57.

Watch Out For:

  • 8:00 am GMT: U.K. Nationwide house price index (0.2% expected, 0.0% previous)
  • 9:15 am GMT: Swiss retail sales (-2.0% expected, -2.3% previous)
  • 9:15 am GMT: Spanish manufacturing PMI (53.7 expected, 53.3 previous)
  • 9:30 am GMT: Switzerland manufacturing PMI (54.5 expected, 54.7 previous)
  • 9:45 am GMT: Italian manufacturing PMI (51.4 expected, 50.9 previous)
  • 9:50 am GMT: French final manufacturing PMI expected to remain at 51.5
  • 9:55 am GMT: German final manufacturing PMI expected to remain at 54.4
  • 10:00 am GMT: Euro Zone final manufacturing PMI expected to remain at 53.7
  • 10:00 am GMT: Italian monthly unemployment rate down from 11.7% to 11.6%
  • 10:30 am GMT: U.K. manufacturing PMI (54.4 expected, 54.3 previous)
  • 11:00 am GMT: Italian monthly unemployment rate (11.6% expected, 11.7% previous)

See also:

U.S. Session Recap
London Session Recap

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