U.S. Session Forex Recap – Feb. 4, 2016

  • U.S. ADP non-farm employment change at 205K vs. 193K forecast
  • U.S. ISM non-manu PMI dropped from 55.3 to 53.5 vs. 55.1 forecast
  • Fed official Dudley: Dollar strength could hurt U.S. economy
  • U.S. crude oil inventories up by 7.8 million barrels vs. 3.7 million estimate
  • OPEC set for a special meeting this month
  • WTI crude oil up to $32.62/barrel, gold up to $1,140.50/ounce

Dollar bears, unite! Major currencies ganged up on the U.S. currency, forcing it to cough up its recent forex gains. What the heck just happened?

Major Events:

Dovish Dudley’s testimony – The U.S. dollar selloff started when Fed official Dudley stepped up to the podium to give a speech, as he acknowledged the ongoing global economic slowdown but cautioned that further dollar strength could wind up hurting Uncle Sam.

Dudley added that financial conditions are considerably tighter than they were in December, hinting that the FOMC might not be so keen on increasing borrowing costs again in March.

Mixed U.S. economic data – Soon after, the U.S. economy got busy printing its latest batch of economic reports, and the mixed results did very little to support the currency. The ISM non-manufacturing PMI fell short of expectations, as the reading dropped from 55.3 to 53.5 to indicate a much slower pace of industry growth.

Components of the ISM survey revealed that the employment sub-index slipped from 56.3 to 52.1, setting the stage up for a potential NFP disappointment. Most sub-indices such as new orders, inventories, and new export orders also declined, except for the components on supplier deliveries and backlog of orders. Yipes!

On a less downbeat note, the ADP report showed a rise of 205K in hiring, stronger than the projected 193K increase. To top it off, the previous reading was upgraded from 257K to 267K.

OPEC to push through with special meeting? – Word through the crude oil pipeline is that more OPEC member nations are starting to warm up to the idea of having a special meeting to discuss what they plan to do about production levels. While the hotshots over at Saudi Arabia still refuse to curb production, smaller oil-producing nations like Venezuela and Iran would like to take some action in order to boost prices.

In other oil-related news, the U.S. crude oil inventories report indicated a buildup of 7.8 million barrels, more than twice as much as the projected increase of 3.7 million barrels, but it looks like black crack traders already saw that coming.

Major Currency Movers:

USD – The Greenback suffered a sharp forex selloff towards the end of the U.S. trading session, thanks to a combination of dovish Fed rhetoric and unimpressive data.

USD/JPY slumped to a low of 117.06 after trading around the 119.50 area earlier on, EUR/USD popped up to a high of 1.1145 after consolidating near the 1.0950 area, GBP/USD surged up to test the 1.4650 minor psychological level, and AUD/USD jumped above the .7100 mark to a high of .7180.

CAD – The Loonie took advantage of the surge in crude oil prices to regain lost ground against its forex rivals, ignoring the buildup in stockpiles and focusing its attention on the stronger likelihood of an OPEC huddle.

USD/CAD crashed below the 1.4000 major psychological support to a low of 1.3727, CAD/JPY spiked to a high of 86.08, EUR/CAD is testing support at the 1.5200 mark, and GBP/CAD is hovering just above the 2.0000 major psychological support.

Watch Out For:

  • 12:30 am GMT: Australia NAB business confidence index

See more:

Asian Session Recap

London Session Recap

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