U.S. Session Forex Recap – Oct. 13, 2014

  • CA labor force gains a net of 74.1K workers in September vs. 20K increase expected
  • CA unemployment rate drops from 7.0% to 6.8%
  • US import price index up down by 0.5%, better than 0.7% downtick expected and 0.6% decline last month
  • Weakness in US equities weighs on high-yielding currencies

Risk aversion flows continued to dictate forex price action during the U.S. session, as traders focused on selloffs in the equities markets.

The biggest story of the hour was the overall risk aversion that gripped the markets. Uncle Sam didn’t print any economic report, but investors priced in a cocktail of other bearish speculations. First, the start of the earnings season brought fears that companies would use weakening global growth and unrelenting dollar strength as reasons for missing earnings expectations.

It also didn’t help that weak data printed during the London session fueled concerns over the region’s growth. On top of that, falling oil and metal prices are supporting speculations that China’s economy is slowing down faster than we thought.

Still, other investors believe that the price action was just the start of a long overdue correction. Whether it’s due to risk aversion or market correction though, S&P 500 still finished its worst week in two years while the Dow erased all of its 2014 gains. Yikes!

Volatility was relatively muted in the forex arena, and it was the low-yielding currencies that raked in the pips. The yen led the pack with EUR/JPY’s 48-pip drop to 135.89, AUD/JPY’s 36-pip decline to 93.57, and NZD/JPY’s 20-pip slip to 84.12. The Greenback also saw some action with EUR/USD falling by another 36 pips to 1.2613 and USD/CHF jumping by 27 pips to .8586.

Canada also hit the headlines after printing better-than-expected employment numbers. Apparently, a record job growth in the private sector was what dragged the unemployment rate to its lowest since December 2008. The report didn’t help the Loonie much though, as it still lost 19 pips to the yen and 16 pips to the dollar even as it gained 23 pips on the euro and 18 pips on the Aussie.

Will risk aversion continue to influence forex price action? Japan’s markets are out on Health-Sports Day today, but we do have China’s trade balance data out at 2:00 am GMT. Market players are expecting a 41.1 billion USD trade surplus in September, lower than August’s 49.8 billion USD figure. Aside from the headline figure, watch out for China’s import and export numbers. A drop in exports could mean bearish news for China’s major trade partners and could fuel overall risk aversion in the markets.

Good luck!

See also:

London Session Recap

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