U.S. Session Forex Recap – May 23, 2016

  • Canadian headline CPI up by 0.3% vs. 0.4% forecast
  • Canadian core CPI up by 0.2% vs. 0.1% forecast
  • Canada’s headline retail sales fell 1.0% vs. expected 0.7% drop
  • Canada’s core retail sales dipped 0.3% vs. estimated 0.4% decline
  • U.S. existing home sales up from 5.36M to 5.45M
  • Japanese trade surplus widened from 0.30T JPY to 0.43T JPY

Profit-taking was the name of the game in Friday’s New York session, as higher-yielding currencies retreated against their safe-haven counterparts.

Major Events:

Mixed data from Canada – Canada just printed its CPI and retail sales reports and the results were looking as mixed as the reviews for the latest X-Men movie. Headline CPI came in slightly weaker than expected with a 0.3% increase versus the projected 0.4% rise while core CPI beat estimates with a 0.2% uptick. Components of the report showed that energy prices were still falling, albeit at a slower pace compared to the previous months.

Meanwhile, headline retail sales slumped by 1.0%, worse than the estimated 0.7% drop. Core retail sales managed to post a smaller than expected 0.3% decline versus the projected 0.4% drop. Much of the decline can be attributed to weaker sales at motor vehicles and parts dealers, as well as lower purchases in furniture and home furnishing stores.

End of the week profit-taking – Traders didn’t seem willing to leave any positions exposed to weekend event risk, especially with the G7 Summit lined up. Because of that, a huge volume of trades from earlier in the week were probably closed on Friday, leading to notable pullbacks from the strong trends.

In particular, yen pairs returned some of their gains from the past few days, as market participants anticipated that G7 leaders would discuss the prospect of currency intervention in Japan. Rumors that the BOJ is gearing up to end its QE program also fueled the yen’s rallies then.

Major Currency Movers:

JPY – The Japanese yen was one of the biggest beneficiaries of profit-taking ahead of the weekend, as it chalked up gains across the board.

USD/JPY retreated from a high of 110.55 to a low of 110.08, EUR/JPY turned upon hitting 124.05 then closed at 123.57, GBP/JPY fell from a high of 160.88 to a low of 153.53, and AUD/JPY retreated below the 80.00 mark to a low of 79.47.

GBP – The pound was unable to hold on to its gains earlier in the day, as traders were extra careful about Brexit speculations.

GBP/USD broke below support at 1.4600 then hit a low of 1.4486, EUR/GBP pulled up from a low of .7655 to the former support at .7750, GBP/AUD fell from a high of 2.0225 to a low of 2.0055, and GBP/CAD retreated back to the 1.9000 handle.

Watch Out For:

  • 2:00 am GMT: Japanese flash manufacturing PMI (48.3 expected, 48.2 previous)
  • 4:30 am GMT: Japanese all industries activity m/m (0.7% expected, -1.2% previous)

See also:

Asian Session Recap

London Session Recap

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