Daily Forex Fundamentals – November 6, 2013

London Session Wrap-up

  • German factory orders jump by 3.3% in September
  • U.K. manufacturing production up by 1.2% as expected
  • Euro zone final services PMI better than expected at 51.6 vs. 50.9

The euro was able to extend its gains against the U.S. dollar and the Japanese yen in the London session, as euro zone data came in mostly better than expected. German factory orders surged by a whopping 3.3% in September, much higher than the estimated 0.6% increase, while the region’s final services PMI also beat expectations.

Meanwhile, the pound was able to hold on to its recent gains when the U.K. manufacturing production report came in line with consensus as well. The industrial production component of the release showed a higher than expected increase of 0.9% versus the estimate at 0.7%.

At the start of today’s U.S. session, the Challenger job cuts report printed a 4.2% annual decline for October. In the next few hours, we will see building permits data from Canada, along with its Ivey PMI. Building permits are expected to rebound by 7.8% while the Ivey PMI could improve from 51.9 to 54.7, both of which could be positive for the Canadian dollar.

Asian Session Wrap-up

  • Nikkei closes with 0.79% gain, Asian equities end higher
  • Spanish and Italian services PMI due
  • U.K. manufacturing production to show 1.2% rebound

Risk appetite was up in today’s Asian trading session, as equity markets posted gains while higher-yielding currencies edged higher against the dollar and the yen. The Nikkei posted a 0.79% gain, pushing the positively-correlated USD/JPY to a high of 98.75. Asian traders continued to react positively to better-than-expected U.K. services PMI and strong New Zealand jobs data, allowing GBP/USD and NZD/USD to extend their rallies.

Up ahead, we have plenty of economic reports that could provide volatility for EUR and GBP pairs. Spain and Italy are set to print their non-manufacturing PMIs, which are expected to post declines for October. Meanwhile, the U.K. will be releasing its manufacturing production report at 10:30 am GMT and possibly show a 1.2% increase.

Also due in the next few hours are the euro zone retail sales report and German factory orders data. Euro zone retail sales are projected to slip by 0.3% while German factory orders could show a 0.6% climb. Take note though that another round of disappointing figures from the euro zone could lead to strong breaks below key levels for EUR/USD and EUR/JPY.

U.S. Session Wrap-up

  • U.S. ISM non-manufacturing PMI up from 54.4 to 55.4
  • New Zealand employment change up by 1.2% for Q3
  • Australian trade deficit at 0.28 billion AUD vs. 0.51 billion AUD expected

After losing ground to some of its major counterparts in the earlier trading sessions, the U.S. dollar got back on its feet when the ISM non-manufacturing PMI report showed better than expected results. The index climbed from 54.4 to 55.4 instead of dipping to the estimate at 54.2, showing that the services industry made a stronger expansion in October.

A few hours ago, New Zealand printed a stronger than expected increase in hiring for Q3 2013, as the employment change report had a 1.2% increase versus the estimated 0.5% uptick. This gave NZD/USD a strong boost right after the release and might keep Kiwi pairs supported throughout the Asian session. The Australian dollar might also stay afloat in the next few hours, as the Australian trade balance showed a smaller than expected deficit.

There are no other major reports due for the rest of today’s Asian session, as currency pairs could move to the tune of risk sentiment. Do keep tabs on Japan’s 10-year bond auction though since the behavior of bond yields could have an impact on yen pairs, such as USD/JPY and EUR/JPY.

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