London Session Forex Recap – Oct. 6, 2016

  • German factory orders m/m: 1.0% vs. 0.3% expected, 0.3% previous
  • German factory orders y/y: 2.1% vs. 1.6% expected, -0.6% previous
  • Swiss CPI m/m: 0.1% vs. 0.2% expected, -0.1% previous
  • Swiss CPI y/y: -0.2% vs. 0.0% expected, -0.1% previous
  • Euro Zone retail PMI: 49.6 expected, 51.0 previous

Price action was rather choppy during today’s morning London forex session, with many currency pairs trading sideways. Nevertheless, we got some directional movement from the pound and the Swissy.

Major Events/Reports:

ECB minutes – The minutes of the September 7-8 ECB meeting got released earlier. And according to the minutes, “incoming data continued to point to the euro area economy’s resilience to global and political uncertainty.” However, “downside risks remained and underlying inflation was still not showing convincing signs of a sustained pick-up.”

Still, ECB members “widely agreed that policy action at the present meeting was not warranted and that the focus should remain on ensuring the full implementation of the policy measures so far decided.” And their explanation for maintaining the current monetary policy is that “financing conditions had to remain supportive to underpin the recovery in growth and inflation,” given the “remaining downside risks and uncertainties relating, in particular, to the external environment.”

However, the ECB can still extend its QE program beyond March 2017. Heck, the ECB can even “adopt further measures, if needed, to fulfill its price stability objective.”

Overall, nothing really new from what we’ve already heard before. Also, the ECB meeting was before the before all the talk about the QE tapering, which is probably why it didn’t have a lot of impact on the euro.

Risk aversion persists in Europe – Another wave of risk aversion permeated across Europe, and so most equity indices got kicked lower for the second day running.

  • The pan-European FTSEurofirst 300 was down by 0.30% to 1,352.35
  • The blue-chip Euro Stoxx 50 was down by 0.41% to 3,016.00
  • The U.K.’s FTSE 100 was down 0.20% to 7,019.00
  • Germany’s DAX was down by 0.35% to 10,548.90

U.S. equity futures also got weighed down by the risk-off vibes.

  • S&P 500 futures were down by 0.22% to 2,148.50
  • Nasdaq futures were down by 0.18% to 4,864.62

Market analysts are still pointing to jitters over the possibility that the ECB may be tapering its QE program.

Major Market Movers:

GBP – The pound tried to rally during the first half of the morning London session, but pound bears later came out of the woods and mauled the bulls. There was no direct catalyst for the pound’s weakness. However, some market analysts blamed the renewed Brexit jitters for the slide, particularly fears that the U.K. may not be getting a favorable E.U. trade deal.

GBP/USD was down by 54 pips (-0.43%) to 1.2660, GBP/CAD was down by 64 pips (-0.38%) to 1.6715, GBP/JPY was down by 49 pips (-0.38%) to 131.22

CHF – Despite the risk-off mood, there was hardly any demand for the safe-haven Swissy. In fact, the Swissy ended up as the second-weakest currency after the pound.

AUD/CHF was up by 19 pips (+0.26%) to 0.7417, CAD/CHF was up by 17 pips (+0.23%) to 0.7411, EUR/CHF was up by 18 pips (+0.17%) to 1.0942

USD – Price action was pretty choppy, but the Greenback somehow scored a victory against all its forex rivals. Other than safe-haven demand for the Greenback, there was no apparent catalyst. In addition, the Greenback only barely edged a victory against some of its peers, so the Greenback may have just been lucky. However, it’s also possible that preemptive positioning ahead of tomorrow’s NFP report may have kept the Greenback supported. By the way, Forex Gump has a write-up on the NFP report, so read it here, if you’re interested.

USD/CHF was up by 27 pips (+0.28%) to 0.9784, USD/CAD was up by 6 pips (+0.05%) to 1.3202, USD/JPY was up by 6 pips (+0.06%) to 103.66

Watch Out For:

  • 12:30 pm GMT: Canadian building permits (1.0% expected, 0.8% previous)
  • 12:30 pm GMT: U.S. initial jobless claims (256K expected, 254K previous)
  • 3:50 pm GMT: BOC Senior Deputy Governor Carolyn Wilkins has a speech
  • 10:30 pm GMT: AIG’s Australian construction PMI (46.6 previous)

See also:

Asian Session Forex Recap

U.S. Session Recap

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