Daily Forex Fundamentals – November 21, 2013

London Session Recap

  • RBA Governor Glenn Stevens open to intervention
  • EUR recovers as Draghi downplays negative deposit rates
  • Positive German mfg PMI offsets France’s weak PMI numbers
  • BOJ hints at extending loose monetary policy
  • UK public borrowing at 6.4B GBP vs. 8.6B GBP in September
  • UK CBI industrial order expectations at 11 vs. -4 previous

What a busy day for London session traders! First off, Aussie and the Kiwi fell deeper in the charts after RBA Governor Glenn Stevens expressed his frustration over the market factors driving the Aussie higher and hinted that a currency intervention is still in their toolkit. AUD/USD fell below its .9300 support while NZD/USD tested its major .8200 floor.

The euro experienced a heck of an intraday bounce after ECB’s Draghi said that there’s “no news” about negative deposit rates and that markets should think nothing of it. Not surprisingly, the common currency erased most of its intraday losses across the board. Of course, it also helped that Germany’s upside surprises in its manufacturing PMI numbers more than made up for France’s dismal readings.

The dollar bulls also got busy as they pushed USD/JPY strongly above 100.50 after BOJ Governor Kuroda hinted at more stimulus. Apparently, the central banker talked to the reporters a few hours after the BOJ monetary policy decision’s release and suggested that the BOJ won’t hesitate to act if the markets aren’t lining up with their projections. That probably explains why USD/JPY is knocking on 101.00 as I’m writing this.

The only reports left for the day are the U.S. PPI and initial jobless claims at 2:30 pm GMT, flash manufacturing PMI at 3:00 pm GMT, and the Philly Fed manufacturing index at 4:00 pm GMT. Will these reports change the tone of the Greenback’s price action for the rest of the day? Don’t even think of missing them!

Asian Session Recap

  • BOJ keeps its policies steady
  • AUD and NZD decline on weak Chinese manufacturing PMI

The Asian markets got busy during the Asian session as China’s manufacturing PMI surprisingly printed weak numbers. The HSBC’s report came in at 50.4 in November instead of the 50.8 expected reading. That’s the fastest decline in SIX months! Word on the hood is that new export orders also registered its lowest numbers in six months. Not surprisingly, AUD/USD and NZD/USD fell to their major psychological support levels.

Meanwhile, the BOJ’s monetary policy statement turned out to be a non-event. The central bank kept its current policies steady with only a warning that it could make changes if needed. The news was all the JPY bears needed to drag the currency higher though, as the yen crosses are showing spikes and upside breakouts ahead of the London open. Heck, USD/JPY has already touched a 4-month high!

The day’s not over yet. At 9:00 am GMT we’ll see a slew of euro zone flash manufacturing PMI reports which could dictate the euro’s price action for the rest of the session. Then, at 10:05 am GMT RBA Governor Glenn Stevens will be making a speech, where he’s expected to jawbone the Aussie some more.

Last but not the least, we’ll get the U.K.’s public sector numbers at 10:30 am GMT and the CBI industrial order expectations at 12:00 pm GMT. Both reports are expected to show better figures than last month, but keep your eyes peeled in case we see worse-than-expected numbers!

U.S. Session Recap

  • U.S. headline retail sales 0.4% vs. 0.1% expected, core reading at 0.2% vs. 0.1% expected
  • U.S. headline CPI at -0.1% vs. 0.0% expected, core reading at 0.1% vs 0.1% expected
  • 2 ECB sources hint at negative deposit rates
  • ECB’s Weidmann says they “technically” haven’t exhausted their options yet
  • USD rallies on taper-friendly FOMC minutes

The U.S. session was a boon for day traders as the major currencies reacted to rumors and news events. While the dollar didn’t get much support from the slightly better-than-expected retail sales numbers, it did rally when the FOMC minutes revealed that the Fed is considering tapering its asset purchases in the coming months.

Unfortunately, the euro didn’t get the same lovin’ from the bulls. The ECB officials were hard at work at talking down their currencies with Weidmann reminding us that they technically haven’t exhausted their options yet. Then, a couple of minutes later a Bloomberg article cited two anonymous sources from the ECB, who are hinting at a “mini deposit rate cut” that would put the rates in the negative territory for the first time.

The same weaknesses were also seen from the other high-yielding currencies. With the yen and the dollar gaining ground across the board, it wasn’t surprising to see the pound, Aussie, Kiwi, and also the Loonie give up some of their intraday gains.

Will we see the same risk aversion today? That might depend on China’s HSBC manufacturing PMI reading coming up at 2:45 am GMT, followed by the BOJ’s monetary policy decision some time during the Asian session. These reports are potential game changers for the day, so y’all better watch out!

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In forex trading, you get better odds at securing pips when your fundamental analysis is complemented by technical analysis.

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