U.S. Session Recap – July 18, 2014

  • Malaysia Airlines MH17’s crash in Ukraine sparks risk aversion
  • Israel launches ground invasion in Gaza
  • CA foreign securities purchases soars to 21.43B CAD vs. 10.2B CAD previous
  • US building permits: 0.96M vs. 1.04M expected and 1.01M previous
  • US housing starts: 0.89M vs. 1.02M expected and 0.99 M previous
  • US initial jobless claims: 302K vs. 310K expected and 305K previous
  • US Philly Fed manufacturing index: 23.9 vs. 16 expected and 17.8 previous

Risk aversion was the name of the game during the U.S. forex trading session as geopolitical tensions in closely-watched regions rose. As I mentioned in my London session update, the EU and the US’ fresh sanctions on Russia targeting its energy and banking companies had already caused concerns of weaker economic activity in the region.

Then, just before mid-day in the U.S. reports that Malaysia Airlines flight MH17 was shot down in rebel-controlled Ukrainian territory circulated the news wires. This was on top of the news that Israel had just launched a ground offensive in Gaza to destroy “terror tunnels” linking Gaza to Israel. Talk about a triple roundhouse kick against risk appetite!

“Safe haven” assets like the yen, franc, government bonds, and gold caught most of the risk avrsion flows. Gold rose by 1.3% to $1,316.90, its strongest rally since June 19, while the U.S. 10-year Treasury yields dropped back below the 2.5% mark.

In the forex arena, it was the yen crosses that were among the biggest losers during the trading session. USD/JPY slipped by 28 pips to 101.22; EUR/JPY fell by another 38 pips to 136.90, and AUD/JPY dropped by a whopping 57 pips to 94.68.

The major dollar pairs traded on mixed U.S. data as well as risk sentiment. The Greenback lost against the pound, euro, and the comdolls when Uncle Sam printed weak building permits and housing starts figures but soon reversed their gains when news on the Malaysian Airlines flight hit the markets and the U.S. also released its better-than-expected initial jobless claims and Philly Fed manufacturing numbers. GBP/USD popped to a high at 1.7112 before closing back below the 1.7100 area. The Aussie, Kiwi, and Loonie also gained a few pips on the dollar but closed around 10-20 pips lower than their open prices.

We don’t have a lot of potential market movers during the Asian trading session since the BOJ’s monetary policy meeting minutes is the only scheduled event. Instead, keep close tabs on your risk-sensitive currency pairs and watch for signs of continuation, retracement, or reversal from the previous session’s moves.

Don’t forget to be flexible in your trade ideas, folks!

See also:

London Session Recap

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