London Session Forex Recap – May 23, 2016

  • French flash manufacturing PMI: 48.3 vs. 49.0 expected, 48.0 previous
  • French flash services PMI: 51.8 vs. 50.6 expected 50.6 previous
  • German flash manufacturing PMI: 52.4 vs. 52.0 expected, 51.8 previous
  • German flash services PMI: 55.2 vs. 54.6 expected, 54.5 previous
  • Euro Zone flash manufacturing PMI: 51.5 vs. 51.9 expected, 51.7 previous
  • Euro Zone flash services PMI: 53.1 vs. 53.3 expected, 53.1 previous

Looks like forex price action during Monday’s morning London session was being driven by risk sentiment. And since risk aversion was the dominant sentiment, the safe-haven currencies ended up using the higher-yielding comdolls to mop the floor.

Major Events/Reports:

Negative Brexit-related news – There were a lot of Brexit-related news that were making the round during the morning London session, and they were mostly negative to boot. U.K. Finance Minister George Osborne, for example, warned that the U.K. will likely lose half a million jobs and earnings for British workers will drop if a Brexit does occur. The U.K. treasury, meanwhile,  released a report earlier which warned that the U.K. GDP will fall by 3.6% in the event of a Brexit.

Commodities under pressureMost commodities extended their losses during the morning London session. The precious metal gold was down by 0.29% to $1,249.25 per troy ounce despite the prevailing risk-on sentiment while the industrial metal copper was down by 0.17% to $2.052 per pound. Oil benchmarks were also bleeding out, with U.S. crude oil down by 1.09% to $47.88 per barrel while Brent crude oil was down by 0.88% to $48.30 per barrel by the end of the session.

The broad-based commodities slide was likely due to lingering concerns over weaker demand, particularly for industrial commodities, after the details of Japan’s trade data failed to impress earlier and seasonal demand from China began to subside.

Oil also has its own particular catalysts, namely Iran’s stubborn refusal to commit to a new oil freeze deal and signs that Canadian oil companies may start operating again after getting disrupted by the wildfires during the past few weeks.

Downbeat day in Europe – European markets followed Asian markets by starting the week with some gloomy vibes. The pan-European FTSEurofirst 300 was down by 0.84% to 2,934.00, the Euro Stoxx 50 was down by 0.67% to 1,317.60, and the DAX was down by 0.78% to 9,838.50 near the end of the morning London session.

Market analysts blamed the downbeat start for the week to continuing expectations that the U.S. Fed may be hiking rates in June, although some market analysts also pointed to specific negative reports for individual companies. Also, falling commodity prices likely helped to sour the market’s mood during the session.

Major Currency Movers:

Safe-havens – The safe-haven currencies (USD, JPY, CHF) were getting a lot of love from forex traders during the morning London session, thanks to the general risk aversion that persisted throughout the session. Among the safe-havens, the yen emerged triumphant and even ended the session as the one currency to rule them all.

EUR/USD was down by 21 pips (-0.20%) to 1.1211, NZD/USD was down by 24 pips (-0.35%) to 0.6777, AUD/USD was down by 27 pips (-0.38%) to 0.7216

USD/JPY was down by 16 pips (-0.15%) to 109.47, CAD/JPY was down by 33 pips (-0.40%) to 83.29, CHF/JPY was down by 29 pips (-0.26%) to 110.52

AUD/CHF was down by 16 pips (-0.23%) to 0.7147, NZD/CHF was down by 15 pips (-0.22%) to 0.6712, CAD/CHF was down by 11 pips (-0.14%) to 0.7535

AUD – Falling commodity prices and the risk-off environment meant that the higher-yielding comdolls (AUD, CAD, NZD) were all feeling the burn. The Aussie got the worst of it, though, since it ended up losing to its fellow comdolls.

AUD/JPY was down by 42 pips (-0.53%) to 79.01, AUD/CAD was down by 10 pips (-0.10%) to 0.9484, AUD/NZD was down by 3 pips (-0.03%) to 1.0646

GBP – The pound actually had a more mixed performance during the morning London session but there was a very noticeable pattern for all pound pairs. To be more specific, pound pairs climbed higher across the board at the start of the session before dropping back down again. The pound was able to hold onto its gains against most of the comdolls but got a beating from the safe-haven currencies.

GBP/USD was down by 39 pips (-0.27%) to 1.4481 with 1.4548 as session high, GBP/JPY was down by 64 pips (-0.41%) to 158.54 with 159.49 as session high, GBP/CHF was down by 21 pips (-0.15%) to 1.4342 with 1.4418 as session high

Watch Out For:

  • Victoria Day holiday in Canada today
  • 1:45 pm GMT: U.S. flash manufacturing PMI (51.0 expected, 50.8 previous)
  • 2:00 pm GMT: Euro Zone consumer confidence (-9.0 expected, -9.3 previous)
  • 2:30 pm GMT: Australia’s CB leading index (-0.3% previous)

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

Bonnie and Clyde, peanut butter and jelly, Kanye West and Kanye West. Some things just go well together.

In forex trading, you get better odds at securing pips when your fundamental analysis is complemented by technical analysis.

Head on to Big Pippin’s Daily Chart Art for some pip-locking technical weeks!