London Session Forex Recap – Jan. 23, 2015

  • French Flash Services PMI: 49.5 vs. 50.8 forecast, 50.6 previous; Manufacturing PMI at 49.5 vs. 48 forecast, 47.5 previous
  • German Flash Services PMI: 52.7 vs. 52.5 forecast, 52.1 previous; Manufacturing PMI at 51 vs. 51.7 forecast, 51.2 previous
  • European Flash Services PMI: 52.3 vs. 52 forecast, 51.6 previous; Manufacturing PMI at 51 vs. 51 forecast, 50.6 previous
  • U.K. Retail Sales m/m: 0.4% vs. -0.6% forecast, 1.6% previous; Core Retail Sales m/m: 0.2% vs. -0.7% forecast, 1.7% previous

The euro selloff gained steam in the morning London, of course a big part of the bearish sentiment is due to yesterday’s quantitative easing announcement by the European Central Bank but also on fears the Greece may need to ask for an extension of its bailout program (expires Feb. 28) and whether or not they will stick to their austerity program that secures the bailout funds (vote is on Jan. 25).

EUR/USD started off London trade well above the 1.1300 handle before sellers came in strong to price in all of the fears, pushing the pair down to break currently test around 1.1160, with all euro pairs following suit:

EUR/JPY is down 306 pips (-2.27%) to 131.57, EUR/GBP is down 109 pips (-1.44%) to .7455, and EUR/CAD is down 209 pips (-1.49%) to 1.3859

The Japanese yen is strengthening on the session, but without a direct catalyst and with equities rallying around the world (Nikkei 225 +1.05%, EURO STOXX 50 +2.67%) after the ECB QE announcement, we think the broad strength is likely the effect of the EUR/JPY drop on all  yen pairs:

USD/JPY is down 61 pips (-0.52%) to 117.85, GBP/JPY is down 136 pips (-0.77%) to 176.45, and AUD/JPY is down 126 pips (-1.33%) to 93.82

Finally, the Australian dollar is seeing a broad based move to the downside on speculation that we may see a rate cut from the Reserve Bank of Australia, after both the ECB and Bank of Canada eased policy in the last week. Previous forecasts were for a possible rate hike from the RBA, but sentiment is shifting in the other direction, especially if economic data disappoints going forward:

AUD/USD is down 64 pips (-0.80%) to .7960, AUD/NZD is down 21 pips (-0.20%) to 1.0670, and AUD/CAD is down 53 pips (-0.54%) to .9883

The forex calendar for the Friday afternoon London/morning U.S. session is light on data, but we’ll see top tier news from Canada to keep the volatility rolling.

At 1:30 pm GMT,  we’ll get a couple of big Canadian reports in the form of consumer price index data and retail sales data. Both numbers are forecast to dip (CPI: 1.6% y/y forecast vs. 2.0% y/y previous and Retail Sales: -0.2% forecast vs. 0.0% previous) which may be more fuel for Loonie traders to sell, but we are seeing oil rally on the session on news of the passing of Saudi Arabia’s King Abdullah (a proponent of keeping oil production high to drive out small oil companies) so volatility is likely to remain high for the Loonie regardless of who wins out, buyers or sellers.

And to close out the session, we’ve got U.S. flash manufacturing PMI (54 forecast vs. 53.9 previous) at 2:45 pm GMT, and at 3:00 pm GMT, we’ll get the U.S. leading indicator data (0.4% forecast vs. 0.6% previous) and U.S. existing home sales (5.08M forecast vs. 4.93M previous). All are mid-to-low tier events, so unless we see big surprises, the focus for forex traders will likely remain on the euro and Loonie to close out this week’s trading. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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