London Session Forex Recap – July 8, 2016

  • Swiss jobless rate: 3.3% vs. 3.5% expected, 3.3% previous
  • German trade balance: €21.0B vs. €23.5B expected, €25.7B previous
  • German current account: €17.5B vs. €24.6B expected, €28.4 previous
  • French industrial production m/m: -0.5% as expected vs. 1.2% previous
  • French industrial production y/y: 0.5% vs. 0.9% expected, 1.8% previous
  • U.K. goods trade balance: -£9.88B vs. -£10.70B expected, -£9.41B previous
  • U.S. NFP report and Canadian jobs report coming up

Today’s another NFP Friday so volatility got sapped a bit. That doesn’t mean there was no action, though, since the risk-on mood enticed some traders to load up on the comdolls at the expense of the safe-havens.

Major Events/Reports:

NFP Friday! – Today is another NFP Friday, so volatility was naturally a bit more subdued than usual, with some currency pairs trading sideways, as forex traders hunkered down for the upcoming NFP report. Still, there were a few currencies that were clearly on the move, which I’ll be pointing out later.

Oh, if you’re planning to trade the NFP report, make sure to gear up by reading up on Forex Gump’s Forex Preview for the June NFP report.

Moody’s is in the mood for downgrades – While a bit late to the post-referendum party, Moody’s announced that it downgraded its 2016 growth projections for the U.K. from 1.8% to 1.5%. It also downgraded its 2017 GDP projections from 2.1% to 1.2%. And that’s not the end of it since growth forecasts for the Euro Zone were downgraded as well, with 2016’s 1.7% forecast being downgraded and 1.5% while 2017’s projection was slashed from 1.6% to 1.3%.

Moody’s said that the main reason why it also downgraded growth projections for the euro zone was because of the possibility of political contagion, referring to the chance that other E.U. member states may start calling for their own exit.

Commodities climb higherMost commodities were in the green during the morning London session, with the base metal copper up by 0.45% to $2.133 per pound while nickel was up by 0.90% to $660.6 per kilogram. Oil benchmarks also did well, with U.S. WTI crude oil up by 0.97% to $45.58 per barrel and Brent blend crude oil up by 0.93% to $46.83 per barrel.

Precious metals were in the hot seat, though, likely because of the prevalence of risk appetite during the session. Gold was down by 0.34% to $1,357.45 per troy ounce while silver was down by 0.25% to $19.788 per troy ounce.

Market analysts attributed the broad-based commodities rally to a weaker U.S. dollar, which made commodities relatively cheaper and more attractive. Profit-taking after a week of declines may have also lifted commodities.

Risk appetite persists – The European market was in an upbeat mood ahead of the NFP report, with the pan-European FTSEurofirst 300 up by 0.60% to 1,284.61, the blue-chip Euro Stoxx 50 up by 1.26% to 2,817.00, the U.K.’s FTSE 100 up by 0.25% to 6,550.00, and the DAX up by 1.43% to 9,553.00.

U.S. equity futures also posted gains, with the S&P 500 futures index up by 0.29% to 2,098.00 and the Nasdaq futures index up by 0.14% to 4,458.62

The upbeat mood was likely due improving sentiment due to the commodities rally, since market analysts noted that mining companies were the main winners.

Major Currency Movers:

NZD – Rallying commodities and the risk-on mood convinced forex traders to buy up the higher-yielding comdolls. And it looks like the Kiwi got the most loving from forex traders since it managed to trump all its forex rivals. The Loonie’s price action was more mixed, though, probably because traders were not willing to commit too much ahead of Canada’s jobs report.

NZD/USD was up by 28 pips (+0.39%) to 0.7273, NZD/JPY was up by 17 pips (+0.23%) to 73.03, NZD/CHF was up by 44 pips (+0.63%) to 0.7132

GBP – The pound shrugged off the downgrades from Moody’s to end up as the second-strongest currency after the Kiwi.

GBP/USD was up by 46 pips (+0.36%) to 1.2974, GBP/JPY was up by 27 pips (+0.20%) to 130.28, GBP/CHF was up by 74 pips (+0.59%) to 1.2721

CHF – The safe-havens were under bearish pressure due to the risk-on environment. And surprisingly enough, it was the Swissy that got hit the hardest instead of the Japanese yen. in fact, Swissy pairs were the most volatile. There were no catalysts that could account for the Swissy’s weakness, however.

USD/CHF was up by 21 pips (+0.22%) to 0.9802, AUD/CHF was up by 42 pips (+0.57%) to 0.7368, CAD/CHF was up by 25 pips (+0.34%) to 0.7542

Watch Out For:

  • 12:30 pm GMT: Canadian jobless rate (7.0% expected, 6.9% previous)
  • 12:30 pm GMT: Canadian net change in employment (5.0k expected, 13.8K previous)
  • 12:30 pm GMT: U.S. jobless rate (4.8% expected, 4.7% previous)
  • 12:30 pm GMT: U.S. non-farm payrolls (180K expected, 38K previous)
  • 12:30 pm GMT: U.S. average hourly earnings (0.2% expected, same pace as previous)
  • 7:00 pm GMT: U.S. consumer credit ($16.00B expected, $13.42B previous)

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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