London Session Forex Recap – Nov. 7, 2014

  • German Industrial Production: 1.4% vs. 2.0% forecast, -3.1% previous
  • German Trade Balance: 21.9B EUR vs. 18B EUR forecast, 10.5B EUR previous
  • Swiss Retail Sales: 0.3% vs. 1.4% previous
  • U.K. Trade Balance: -9.82B GBP vs. -9.5B GBP forecast, -8.95B GBP

As expected, forex volatility was light ahead of the highly anticipated U.S. NFP report, but there some moves of note, mainly in the British pound and Australian dollar.

Thanks to a weakening trade balance picture in the U.K., Sterling saw continued selling pressure on the session, starting at the London open.  The moves have been light relative to this week’s big volatility, but we are seeing Sterling lower across the board on the session:

GBP/USD is down 14 pips (-0.08%) to 1.5816, EUR/GBP is up 20 pips (+0.25%) to .7834 and GBP/AUD is the biggest loser among the Sterling pairs, down 100 pips (-0.55%) to 1.8393

The other move of note on the session is in the Australian dollar, which went into rally mode right from the London open.  This is a bit strange as we don’t seem to have a direct catalyst and we even got RBA meeting minutes showing that the central bank thought the Aussie was high by historical standards and would prefer a lower exchange rate.  Whatever the case may be, the Aussie is up across board with momentum still on its side:

AUD/USD is up 40 pips (+0.48%) to .8596, AUD/JPY is up 57 pips (+0.59%) to 99.13, and EUR/AUD is down 36 pips (-0.25%) to 1.4418

The forex calendar for the final afternoon London/morning U.S. session of the week is going to be action packed with reads on employment conditions in North America, including the always highly anticipated U.S. Non-Farm Payrolls report at 1:30 pm GMT.

The forecast for the Canadian report is for a negative net change to -5K vs. 74.1K in September, and for the unemployment rate to rise to 6.9% vs. 6.8% previous.  The September number was a huge upside surprise, so it’ll be interesting to see if it comes back to Earth in October.

The forecast for the U.S. Non-Farm Payrolls number is around 235K vs. 248K, but there is speculation it could be as high as 275K.  This means that forex traders are expected a big pop, which may support the case for rate hikes by the Fed sooner rather than later. Of course, if we see anything below expectations, it may mean a Greenback selloff as traders pare their rate hike bets.  Whatever we get, it’ll most definitely be fast moves for both the U.S. and Canadian dollars during this hour.

And to close out the economic calendar for the week, we’ll get the U.S. consumer credit data point at 8:00 pm GMT.  The forecast is for a rise to $16B vs. $13.53B, lower than the peak $26B levels we saw in the summer.  It’s a mid-tier report, so if we don’t see a huge surprise then don’t expect much of a reaction as traders continue to focus and adjust U.S. dollar positions after the NFP event.

See also:

Asia Session Recap

U.S. Session Recap

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  • ForExchange

    Hi Pip Diddy,

    don’t you think that the AUD run has to do with gold rising? It started also a nice gain today. Intermarket correlations might have an affect here.

    Have a nice weekend,
    FE

    • Hey ForExchange…I’ll hop on this questions for Pip Diddy. In my opinion, gold doesn’t have much intermarket influence these days, like during the financial crisis of 2008 – 2009 when everyone thought the Fed QE would cause massive inflation. To me, gold behavior is reactionary to what the Dollar is doing, similar to what we’re seeing with the other raw material markets.

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