London Session Forex Recap – Oct. 5, 2015

  • Spanish Services PMI: 55.1 actual v.s. 59.7 expectd, 59.6 previous
  • French Services PMI: 51.9 actual v.s. 51.2 expected, 51.2 previous
  • German Services PMI: 54.1 actual v.s. 54.3 expected, 54.3 previous
  • Euro Zone Services PMI: 53.7 actual v.s. 54.0 expected, 54.0 previous
  • Euro Zone Composite PMI: 53.6 actual v.s. 53.9 expected, 53.9 previous
  • Euro Zone Sentix Indicator: 11.7 actual v.s. 12.2 expected, 13.6 previous
  • Euro Zone Retail Sales m/m: 0.0% actual v.s. -0.1% expected, 0.6% previous
  • U.K. Services PMI: 53.3 actual v.s. 56.4 expected, 55.6 previous
  • ISM non-manufacturing PMI coming up

Today’s morning London forex session was another risk-on day, which means another lopsided battle between the safe-havens and the higher-yielding currencies.

Risk sentiment was the primary driver of forex price action once again, and today’s morning London forex session was another risk-on day, with the DAX up by a very solid 2.16% to 9,758.80 during the freox session. Commodities were broadly in the green as well, with Brent crude oil up by 1.14% to $48.68 per barrel on reports that Russia may now be willing to talk with other oil producers to discuss the oil market and declining oil prices.

As a natural consequence of higher commodity prices, all comdolls got some much-needed love from forex traders. But surprisingly enough, it was the Kiwi, not the Loonie, that got the most love. There weren’t any direct catalysts related to New Zealand during the London forex session nor the earlier Asian trading session, so the Kiwi’s strength is rather strange.

The only thing going on today that could have had an effect on New Zealand and the Kiwi’s forex price action is the Trans-Pacific Partnership (TPP) deal, and New Zealand is fighting tooth and nail to protect its own dairy industry while trying to secure better access to the American, Canadian, and Japanese markets. Perhaps forex traders were speculating that New Zealand would be able get a good deal? Well, it does seem plausible since the Kiwi has been showing some strength since the Asian session.

NZD/USD is up by 45 pips (+0.70%) to 0.6516, NZD/JPY is up by 65 pips (+0.83%) to 78.33, NZD/CAD is up by 38 pips (+0.45%) to 0.8538

AUD/USD is up by 34 pips (+0.49%) to 0.7097, AUD/CHF is up by 50 pips (+0.57%) to 0.6896, AUD/NZD is down by 21 pips (-0.19%) to 1.0890

USD/CAD is down by 40 pips (-0.31%) to 1.3092, GBP/CAD is down by 93 pips (-0.47%) to 1.9890, EUR/CAD is down by 33 pips (-0.22%) to 1.4723

The higher-yielding pound got some love at the start of the forex session too, but that changed when Markit’s services PMI reading for the U.K. disappointed pound bulls by showing a rather significant drop instead of an increase. Markit’s report wasn’t exactly helping either since the headline reads as follows: “Weakest rise in activity in nearly two-and-a-half years in September.” Not exactly a happy piece of news, huh?

GBP/USD is down by 24 pips (-0.15%) to 1.5190, GBP/NZD is down by 198 pips (-0.84%) to 2.3309, GBP/CAD is down by 96 pips (-0.48%) to 1.9888

As for the euro, it got some demand during the first half of the forex session due, perhaps, to a slew of mostly positive PMI readings. The euro then turned around during the later half of the forex session, even though there weren’t any disappointing news or economic reports.

The most likely reason for the euro’s sudden turnaround is that forex traders were taking some profits off the table, or they were abandoning the low-yielding euro for the higher-yielding currencies and/or equities.

EUR/USD is down by 7 pips (-0.07%) to 1.1227 with 1.1289 as session high, EUR/JPY is up by 12 pips (+0.09%) to 134.99 with 135.71 as session high, EUR/CHF is up by 14 pips (+0.13%) to 1.0924 with 1.0944 as session high

The forex calendar for the upcoming afternoon London/morning U.S. session only has a handful of items on tap, but we’ve got a couple of potential market-movers among the mix, so get ready.

Up first, at 2:45 pm GMT, forex traders will get the final reading for Makit’s services PMI (55.7 expected, 55.6 previous). Do note that the the actual reading is expected to be revised higher, which may be goods news for Greenback bulls, especially if the actual reading beats the consensus.

There’s a chance that the Greenback may not react at all, however, since the reading for ISM’s non-manufacturing PMI (58.0 expected, 59.0 previous) is expected to come out shortly after, at around 3:00 pm GMT. Do note that the ISM’s PMI reading is expected to show a reduction, so expect the U.S. dollar to show some weakness if the actual reading is within expectations or worse.

Also at 3:00 pm GMT, we’ll get the reading for U.S. Fed’s labor market conditions index (2.1 previous). It usually doesn’t move the markets, though, since it is a composite of various labor indicators, most of which have been previously released already. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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