London Session Forex Recap – Apr. 20, 2015

  • German Producer Price Index m/m: 0.1% vs. 0.2% forecast, 0.1% previous
  • German Producer Price Index y/y: -1.7% vs. -1.6% forecast, -2.1% previous

No major forex catalysts during the morning London session, but we did see Asian moves in the comdolls carry over to European trade and the euro weaken, possibly on German and Greek economic data.

As I mentioned in my Asia session update, the People’s Bank of China (PBoC) decided to reduce its reserve ratio requirement (the percentage of deposits allowed to be used as loans) to hopefully boost China’s slowing economy.  The reaction was immediately bullish for the commodity dollars (mainly the Aussie and the Kiwi) because if China’s situation improves, then this likely benefits their major trading partners like Australia and New Zealand.

Although we did see a little bit of retracement after the European open, this overall bullish sentiment continued into London trade and even helped support the Loonie, which is also feeling the love on the recent oil rebound and positive Canadian data on Friday (better-than-expected consumer price index and retail sales).

AUD/USD is up 16 pips (+0.21%) to .7787, NZD/USD is up 20 pips (+0.25%) to .7690, USD/CAD is down 19 pips (-0.16%) to 1.2214

Unfortunately, euro bulls aren’t getting the same love, possibly on a combination of the weaker-than-expected producer price index data and maybe news of Greece’s current account deficit widening in February.  Neither events were major catalysts, but they do draw the attention of forex traders back to Greece’s debt story and the weak inflation data that has been plaguing euro bulls since the end of 2014. Momentum still seems to be on the side of the bears, and because of Europe’s strong trade ties with the U.K., it seems to be dragging down the British pound with it.

EUR/USD is down 56 pips (-0.52%) to 1.0743, GBP/USD is down 27 pips (-0.18%) to 1.4931, and EUR/GBP is down 18 pips (-0.26%) to .7194

The forex calendar for the Monday afternoon London/morning U.S. session is emptier than a room full of traders who thinks Greece will make it’s next payment on time. Okay, that may be a bit harsh, but with nothing in the Monday lineup, it’s a story forex traders will likely focus on, as well as take cues from the U.S. equity markets for sentiment direction and potential changes in volatility.

So far, Asia equities managed to close lower despite the surprise reserve ratio cut (Hong Kong Hang Seng Index -2.02% to 27.770.79), and Europe is on the upswing with EURO STOXX 50 UP +0.63% to 3,682.32 and FTSE 100 up +0.60% to 7,036.83.

U.S. equity futures are pointing to a lower equity open, which means we’ll likely see safe haven currencies (like the Japanese yen and U.S. dollar) find buyers and high-yielders (like the comdolls and British pound) sell off a bit.  As of now, the Greenback seems to be finding buyers going into the U.S. session as U.S. futures continue to drift lower.

USD/JPY is up 11 pips (+0.10%) to 119.00, USD/CHF is up 61 pips (+0.65%) to .9575, and the DXY (U.S. dollar index) up 0.38 (+0.39%) to 97.81

Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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