London Session Forex Recap – July 4, 2016

  • Spanish unemployment change: -124.3K vs. -99.3K expected, -119.8K previous
  • U.K. construction PMI: 46.0 vs. 50.7 expected, 51.2 previous
  • Euro Zone Sentix indicator: 1.7 vs. 5.0 expected, 9.9 previous
  • Euro Zone PPI m/m: 0.6% vs. 0.3% expected, -0.3% previous
  • Euro Zone PPI y/y: -3.9% vs. -4.1% expected, -4.4% previous
  • SNB sight deposits (domestic): CHF 430,337M vs. CHF 423,466M previous

Volatility dried up during Monday’s morning London session, so price action was a bit choppy, with some pairs trading sideways and closing flat. The comdolls were clearly being supported, however, likely because of the continuing climb in commodity prices.

Major Events/Reports:

U.K. construction PMI drops – Markit’s reading for U.K. construction PMI in June slumped from 51.2 to a seven-year low of 46.0, which is a much harder drop than was expected, since the consensus was that it would slide to 50.7.

The drastic drop was due to a broad-based decline in construction activity, “led by a steep decline in residential building and a reduction in commercial work for the first time since May 2013.”

The drop in construction activity, in turn, was because of the continuing drop in incoming new work orders, given that clients were apparently reluctant “to commence new contracts in the run-up to the EU referendum, alongside ongoing uncertainty about the general economic outlook.”

SNB sight deposits climb higher – The SNB issued a press release earlier, and it showed that the sight deposits of domestic banks that are deposited at the SNB climbed from CHF 423,466 million to CHF 430,337 million for the week ending on July 1, which is a sign that the SNB may be busy intervening in the markets (*cough* market manipulation *cough*), since sight deposits of domestic banks form part of the monetary base.

Risk aversion returns to Europe – Europe is starting the new trading week in a slightly downbeat mood, with the Pan-European FTSEurofirst 300 down by 0.26% to 1,309.97, the blue-chip Euro Stoxx 50 down by 0.13% to 2,878.00, the U.K.’s FTSE 100 down by 0.32% to 6,557.00, and the DAX down by 0.29% to 9,747.50.

Market analysts couldn’t pinpoint the reason for the slide in European equities, but it’s possible that we’re just seeing some profit-taking ahead of top-tier events this week and after a risk-on week last week.

Commodities climb higher – European equities weren’t doing too well, but commodities were doing very well indeed since they broadly extended their gains from the earlier Asian session.

Precious metals soared, likely on the back of safe-haven flows, with gold up by 1.15% to $1,354.35 per troy ounce and silver up by 4.68% to $20.505 per troy ounce. Base metals were also well in the green with copper up by 0.86% to $2.236 per pound while zinc was up by 0.24% to $144.70 per kilogram. As for oil benchmarks, U.S. crude oil was up by 0.31% to $49.14 per barrel while Brent blend crude oil was up by 0.46% to 50.58 per barrel.

The broad-based commodities rally was attributed to speculation that China will introduce more stimulus, according to some market analysts. Although comments from the Saudi Energy Minister that the oil market is beginning to balance out was also being cited for oil demand during the session.

Major Currency Movers:

NZD & AUD– The higher-yielding comdolls, particularly the Kiwi and the Aussie, just shrugged off the prevalence of risk aversion during the morning London session, probably because forex traders were more focused on another round of rallying commodity prices. Although the longer-term fundamentals that I mentioned in my latest Top Forex Market Movers may have also been in play.

NZD/USD was up by 17 pips (+0.25%) to 0.7205, NZD/JPY was up by 10 pips (+0.14%) to 73.92, NZD/CAD was up by 15 pips (+0.17%) to 0.9271

AUD/USD was up by 18 pips (+0.24%) to 0.7259, AUD/JPY was up by 11 pips (+0.15%) to 77.25, AUD/CAD was up by 16 pips (+0.18%) to 0.9688

Watch Out For:

  • U.S. Independence Day today
  • 1:30 pm GMT: Canadian manufacturing PMI (52.1 previous)
  • 2:30 pm GMT: BOC outlook survey will be released
  • 10:00 pm GMT: NZIER business confidence (51.5 previous))

See also:

Asian 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!