U.S. Session Forex Recap – Dec. 8, 2015

  • WTI crude oil down to $37.84/barrel, Brent crude oil at $40.94/barrel
  • Fed official Bullard: Liftoff would be good news for U.S. economy
  • U.S. labor market conditions index at 0.5 in Nov, 2.2 previous

The commodity price bloodbath was still the main story in the forex arena for the U.S. trading session, allowing risk aversion to pop its head back in the financial markets.

Major Events:

More commodity price declines – Crude oil and precious metals continued to feel the pressure throughout the day, as WTI crude oil fell to new lows below $38/barrel and Brent crude oil slipped below the $41/barrel level. The OPEC’s decision to maintain their current oil output levels may be mostly to blame for all this, leading forex market analysts to speculate that another inflationary rout might be looming.

Gold and iron ore have carried on with their slump, weighing on the positively-correlated Australian dollar. Keep in mind that iron ore is one of Australia’s top export products so lower prices translate to lower revenues and possibly weaker business activity and employment prospects.

Flight to safety and dollar domination – The lack of other top-tier movers kept forex junkies focused on the ongoing price tumbles, spurring a risk-off market environment. The safe-haven Greenback has been able to benefit from all this, as the prospect of a Fed liftoff highlighted by FOMC member Bullard in his testimony also added to the dollar’s appeal.

Bullard pretty much confirmed what everyone and his momma are expecting – that it’s about time for the U.S. central bank to start tightening monetary policy soon. “My argument has been that the FOMC’s goals have been met, while the FOMC’s policy settings remain extreme,” he explained. “Prudent policy suggests edging the policy rate and the balance sheet toward more normal levels.”

Major Currency Movers:

Commodity currencies – The higher-yielding comdolls were the biggest victims of the commodity price declines at the start of this trading week, sparking a few breakouts here and there.

AUD/USD is down 63 pips to .7266 (-0.86%), NZD/USD is down 101 pips to .6614 (-1.50%), and USD/CAD made an upside breakout from its tight consolidation to the 1.3500 handle (+1.09%). EUR/AUD is up 94 pips to 1.4910 (+0.64%) and GBP/AUD is up 139 pips to 2.0711 (+0.68%).

USD & JPY – When risk aversion sets in, the U.S. dollar and the Japanese yen are usually the main beneficiaries. Between these two lower-yielders, though, the Greenback still reigns supreme.

EUR/USD dipped to the 1.0800 handle then recovered to 1.0834 (-0.38%), GBP/USD is down 54 pips to the 1.5050 mark (-0.36%), USD/CHF is still hovering around the 1.0000 major psychological level (+0.50%), and USD/JPY is up 26 pips to 123.34 (+0.21%).

Watch Out For:

  • 12:50 am GMT: Japanese current account balance (1.53T JPY expected, 0.78T JPY previous)
  • 12:50 am GMT: Japan’s final Q3 GDP reading (upgrade from -0.2% to +0.1% expected)
  • 1:30 am GMT: Australia’s NAB business confidence index
  • Tentative: Chinese trade balance ($395B expected, $393B previous)

See more:

Asian Session Recap

London Session Recap

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