London Session Forex Recap – Dec. 18, 2015

  • French PPI m/m: 0.1% vs. 0.2% previous
  • French PPI y/y: -2.4% vs. -2.6% previous
  • Euro Zone current account: €20.4B vs. 32.2B expected, €30.1B previous
  • Canada’s CPI readings coming up

No top-tier items on the docket for today’s morning London forex session, so forex traders turned to risk sentiment, oil prices, and the BOJ’s monetary policy decision from earlier for direction.

Major Events:

BOJ’s monetary policy decision still in play – The BOJ’s decision to essentially maintain its stimulus program while expanding the asset types available for purchase continued to weigh-in on the markets (and the yen in particular). To be more specific, the BOJ plans to buy an extra 300 billion JPY worth of exchange-traded funds (ETF) in order to encourage capital expenditure (economic-speak for investment), which is good for the Japanese economy and the yen in the long-run. Also, the fact that the so-called “quantitative and qualitative easing” program (QQE) was not expanded is also good for the yen since QQE involves printing lotsa yen, which essentially devalues the yen.

Oil was down and out for the count – Oil was down again during today’s morning London forex session and was setting up for the third consecutive week of losses, with U.S. crude oil down by 1.23% to $34.52 per barrel and Brent crude oil down by 0.66% to $36.81 per barrel. Most market analysts attributed this week’s poor performance to continuing oversupply concerns. Other commodities were mostly in the green, however. This was probably due to profit-taking after an entire week of declines.

Risk-off day today – Red, red, and more red. The risk aversion that returned during yesterday’s U.S. forex session persisted through the Asian and then the European forex sessions, with the pan-European FTSEurofirst 300 down by 0.58% to 1,426.12 and the Euro Stoxx 50 down by 1.46% to 3,263.00 during the European forex session. Many market analysts attributed the risk aversion to declining oil prices and concerns over the long-term effects of a stronger U.S. dollar and weaker commodity prices.

Major Currency Movers:

JPY – The safe-haven currencies (USD, CHF, JPY) were getting a lot of buyers due to the prevailing risk-off sentiment. But European forex traders were probably pricing-in the BOJ’s monetary policy decision from earlier since the Japanese yen was able to dominate ALL of its forex rivals, including the U.S. dollar.

USD/JPY was down by 42 pips (-0.35%) to 121.37, CAD/JPY was down by 68 pips (-0.78%) to 86.83, CHF/JPY was down by 54 pips (-0.44%) to 122.07

CAD – The higher-yielding comdolls (CAD, NZD, AUD), with the exception of the Kiwi (which was mixed), were down in the dumps during the forex session. The Loonie was particularly weak, however, probably because forex traders were also pricing-in another round of declines for oil prices.

USD/CAD was up by 62 pips (+0.44%) to 1.3975, NZD/CAD was up by 26 pips (+0.28%) to 0.9366, GBP/CAD was up by 34 pips (+0.17%) to 2.0830

EUR – Euro pairs weakened across the board the during the start of the forex session, and I’m pretty confident that it wasn’t the mixed readings for French PPI since those came out before the decline. I’m also pretty sure that it wasn’t the worse-than-expected reading for the euro zone’s current account since the euro found some support shortly after that. Anyhow, the euro’s path then diverged after the initial fall since it won out against the higher-yielders while only recovering slightly versus the safe-havens. The euro’s diverging forex price action also probably means that it’s safe to say that risk sentiment was in play.

EUR/USD was down by 33 pips (-0.31%) to 1.0833 with 1.0804 as session low, EUR/JPY was down by 81 pips (-0.61%) to 131.53 with 131.03 as session low

EUR/AUD was up by 9 pips (+0.06%) to 1.5215 with 1.5112 as session low, EUR/CAD was up by 24 pips (+0.16%) to 1.5144 with 1.5036 as session low

Watch Out For:

  • 1:30 pm GMT: Headline (0.1% expected, 0.1% previous) and core (0.0% expected, 0.3% previous) readings for Canada’s CPI
  • 1:30 pm GMT: Canadian wholesale sales (0.1% expected, -0.1% previous)
  • 2:45 pm GMT: Markit’s flash services PMI for the U.S. (55.9 expected, 56.1 previous)
  • 6:00 pm GMT: Richmond Fed Jeffrey Lacker will speak at the Charlotte Chamber of Commerce

See also:

Asia Session Forex Recap

U.S. Session Forex Recap

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