U.S. Session Forex Recap – Jan. 18, 2016

  • U.S. Dec headline retail sales down by 0.1% as expected
  • U.S. Dec core retail sales down by 0.1% vs. projected 0.2% increase
  • U.S. headline PPI down by 0.2%, core PPI up by 0.1% as expected
  • Empire State manufacturing index slipped from -4.6 to -19.4 vs. -4.1 forecast
  • U.S. industrial production fell by 0.4% vs. -0.2% forecast
  • U.S. preliminary consumer sentiment index improved from 92.6 to 93.3

Just when it seemed as though higher-yielders were about to emerge unscathed last week, risk aversion gripped the forex market once more due to oil industry concerns and mixed U.S. data.

Major Events:

Mixed U.S. economic data – Not so impressive but not so bad either. U.S. headline retail sales dipped by 0.1% in December as expected while core retail sales also fell 0.1% instead of showing the estimated 0.2% uptick. Guess U.S. shoppers didn’t feel the holiday rush that much, huh?

Meanwhile, headline producer prices slid by 0.2% while the core version of the report printed a 0.1% gain as expected. Perhaps the more disappointing releases during last Friday’s U.S. trading session were the Empire State manufacturing index, which tumbled deeper into contraction from -4.6 to -19.4, and the industrial production decline of 0.4% versus the projected 0.2% dip.

On a more positive note, the University of Michigan reported that the preliminary consumer sentiment index improved from 92.6 to 93.3 in January while the previous reading enjoyed an upgrade from 91.8 to 92.6.

Iran’s return to the oil market – Yet another crude oil price drop took place before the markets closed last week, as traders anticipated the surge in supply upon Iran’s return to the export market. Recall that Western nations imposed sanctions, which includes an embargo on oil products, on Iran because of its nuclear program and these were lifted over the weekend.

Now Iran is pretty eager to resume its oil production and export activity, pledging to increase shipments by as much as 500,000 barrels per day in order to make up for the lost revenue when Western sanctions were still in play. With that, fresh concerns of a supply glut drove WTI crude oil to a low of $28.31/barrel and Brent crude oil to a low of $28.76/barrel.

U.S. equity slump – Stock indices closed another day deep in the red, with the S&P 500, Dow 30, and Nasdaq all down by 2% by the time the closing bell rang. The oil price slide and Chinese economic slowdown concerns weighed on investor confidence, as many feared that the worst ain’t over just yet.

Major Currency Movers:

JPY – Thanks to yet another run in risk aversion, the Japanese yen reigned supreme against its forex counterparts, even outpacing the safe-haven U.S. dollar.

USD/JPY broke below the 117.00 major psychological level and fell to a low of 116.51, GBP/JPY had been trading near 170.00 earlier in the day before crashing to a low of 166.22, AUD/JPY fell all the way down to the 80.00 major psychological support, and EUR/JPY managed to limit its losses to roughly a hundred pips until the 127.50 area.

CAD – Surprise, surprise… The oil-related Canadian dollar suffered more declines across the forex charts, even gapping lower against the Greenback and yen over the weekend.

USD/CAD popped up to a high of 1.4552 on Friday then kicked off at the 1.4600 area this week, CAD/JPY dipped to a low of 80.15 last week then started at 79.97 this Monday, EUR/CAD zoomed all the way up to the 1.5950 minor psychological resistance, and AUD/CAD climbed back above parity.

Watch Out For:

  • 4:30 am GMT: Japan’s revised industrial production reading (no changes from initial 1.4% estimate expected)
  • 4:30 am GMT: Japanese tertiary industry activity index (-0.6% expected, +0.9% previous)

See more:

Asian Session Recap

London Session Recap

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