U.S. Session Forex Recap – Jan. 22, 2016

  • ECB Gov Draghi hinted at possible March easing
  • Draghi: No limits on monetary policy tools that they can use
  • Philly Fed manu index up from -5.9 to -3.5 vs. -5.8 forecast
  • U.S. initial jobless claims at 293K vs. 279K forecast
  • U.S. crude oil inventories increased by 4 million barrels vs. 3.3 million estimate
  • U.S. equity indices close the day in the green, S&P 500 up 0.52%

Hints of further easing from ECB head honcho Draghi were positively welcomed by investors, allowing risk appetite to drive forex market flows in the U.S. session.

Major Events:

ECB press conference – Even though the European Central Bank decided to keep their stimulus program unchanged for now, Governor Mario Draghi just couldn’t keep mum about their easing bias.

Dovish Draghi acknowledged that the economic situation has worsened significantly these days, reiterating that they are willing to act if necessary and that they have no shortage of monetary policy firepower in their arsenal. He added that the credibility of the central bank might be questioned if they don’t respond to the need for additional stimulus, citing that they need to adapt to changing conditions.

Stockpiles up but oil prices climb – Crude oil didn’t seem to be too bothered by the larger than expected rise in U.S. crude oil inventories, as the commodity raked in a few gains towards the end of the trading session. Stockpiles rose by 4 million barrels, higher than the projected 3.3 million figure and the previous 0.2 million reading.

WTI crude oil spiked from the $28/barrel levels to a high of $30.06/barrel and Brent crude oil rallied towards $29.58/barrel, as the OPEC lowered its oil production forecasts for its non-OPEC rivals this year. Is the oil cartel finally able to edge out their competition?

Risk-taking or short covering? – U.S. and European stock indices were able to stay afloat throughout the day, taking a break from the recent market bloodbath. The S&P 500 index logged in a 0.52% gain, the Nasdaq recorded a meager 0.01% uptick, and the London FTSE managed to score a 1.77% rebound.

Apart from the prospect of additional ECB stimulus (Yay, cheap money!) and the bounce in oil prices, there doesn’t appear to be any major catalyst for the move. Maybe market guru George Soros’ downplaying the odds of a March Fed rate hike?

Major Currency Movers:

EUR – Euro pairs barely reacted to the ECB’s monetary policy announcement, but it turns out they were saving their huge forex reaction for Draghi’s presser.

EUR/USD broke below its consolidation above 1.0900 and sank to a low of 1.0779, EUR/JPY slipped to a low of 126.18 before closing at 127.80, EUR/GBP found resistance at the .7750 mark then dropped to a low of .7617, and EUR/AUD broke below the 1.5700 support to a low of 1.5453.

USD & JPY – Rally and reverse! The Greenback and the yen barely had any time to enjoy their risk-off winnings when sentiment shifted towards the end of the trading session.

GBP/USD broke below 1.4100 to a low of 1.4079 before scurrying back up to the 1.4200 levels, GBP/JPY slid briefly below the 165.00 handle then suddenly surged past 167.00, USD/CHF jumped to a high of 1.0146 then pulled back to parity, and USD/JPY rallied to a high of 117.78.

Commodity Currencies – The comdoll gang took advantage of the risk-on flows, as their rallies gained traction as the session rolled along.

AUD/USD pulled back to the .6875 area before making its way up to .7000, NZD/USD surged to a high of .6559, and USD/CAD is currently testing support at the 1.4250 minor psychological mark.

Watch Out For:

  • 1:35 am GMT: Japanese flash manu PMI (52.8 expected, 52.6 previous)

See more:

Asian Session Recap

London Session Recap

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