London Session Forex Recap – May 26, 2015

  • Swiss employment level: 4.23M actual v.s. 4.21M expected, 4.23M previous
  • U.K. CBI distributive trades: 51 actual v.s. 20 expected, 12 previous
  • U.S. durable goods orders m/m on tap
  • U.S. housing data coming up

The morning London session was a bit light in terms of economic data but there was no shortage of forex volatility since most currency pairs were on the move, although movement was a bit choppy and most currencies ended the session somewhat mixed. The Greenback and the Swissy, though, were moving in one direction – up.

The Greenback was the star of the morning London session, exploding into the scene when the session opened. There was really no direct catalyst to account for the sudden surge in strength, which suggests that risk sentiment came in play as U.S. futures are currently down for the session. Forex traders could also be pre-emptively positioning ahead the U.S. data later.

USD/JPY is up by 67 pips (+0.56%) to 122.54, USD/CAD is up by 57 pips (+0.46%) to 1.2363, NZD/USD is down by 20 pips (-0.27%) to 0.7293.

Not many forex traders were paying attention to the Swissy, but it was actually stronger than the Greenback during the session, thanks to the Swiss employment level remaining flat, which is better than the expectation that it will decline. Apart from that, forex traders and investors appeared to flee to the safe-haven currency due to concerns over Greece.

USD/CHF is down by 40 pips (-0.43%) to 0.9466, CAD/CHF is down by 37 pips (-0.49%) to 0.7653, GBP/CHF is down by 61 pips (-0.42%) to 1.4590

Speaking of Greece, there were a lot of updates that came out during the session, such as Greece’s promise to repay its debt to the IMF by June 5 and reports showing that the country is very committed to economic reforms. A German official also expressed that there has been progress with regard to Greece. All these optimistic news gave buyers cause to support the euro, with EUR/USD back to the 1.0929 level after losing out to the Greenback at the start of the session.

We’ve got a lot of U.S. economic data points lined up for the upcoming afternoon London/morning U.S. session’s forex calendar, a heck of a lot, so I’ll just focus on the most important data points and then point out the most likely market movers.

At 1:30 pm GMT, we’ll get the month-on-month readings for U.S. headline (-0.5% expected, 4.7% previous) and core (0.3% expected, 0.3% previous) durable goods orders. While the headline data point is expected to show a decline, the core reading is expected to remain flat.

Forex traders usually put more emphasis on the core reading since it’s a more reliable measure for the underlying trend in production. But in Fed Chair Janet Yellen’s latest speech, she continued to have the same level of optimism for a recovery that the Fed had in their last FOMC meeting minutes, so there’s a good chance that forex traders will be looking at the headline data point instead. In any case, prepare for some volatility in the Greenback since these are usually market-movers.

Moving on, we’ll get two mid-tier housing data points at 2:00 pm GMT: FHFA house price index (0.7% expected, 0.7% previous) and S&P Case-Shiller home price index (4.60% expected, 5.03% previous). The former is expected to remain flat while the latter is expected to decline. Nothing new, really. The FOMC minutes did note that the housing sector has been noticeably slow, and this has probably already been priced-in by the market. What forex traders should look out for, is if the actual read for one or both of these data points is better-than-expected since that has a large probability of lending strength to the Greenback.

Speaking of optimistic housing data, U.S. new home sales, which comes out at 3:00 pm GMT, is expected to climb to 510K (481K previous). Perhaps that will entice more Greenback bulls?

Also at 3:00 pm GMT, we’ll get the U.S. consumer confidence survey (95.0 expected, 95.2 previous). This market-mover is a survey of about 5,000 households regarding the economic condition and is a leading indicator for consumer spending. It is expected to decline very slightly, so watch out if the actual reading is either better or worse than expected.

As a bonus, Federal Reserve Governor Stanley Fischer is scheduled to deliver a speech in Israel at around 5:30 pm GMT. Although not likely, do keep an ear out for any any surprise updates, especially on monetary policy. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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