U.S. Session Forex Recap – July 28, 2016

  • U.S. headline durable goods orders down 4.0% vs. -1.1% forecast
  • U.S. core durable goods orders down 0.5% vs. estimated 0.3% gain
  • U.S. pending home sales up 0.2% vs. 1.9% forecast
  • U.S. crude oil inventories rose 1.7 million barrels vs. expected decline of 2.1 million barrels
  • FOMC kept monetary policy unchanged as expected
  • FOMC upgraded economic assessment, near-term risks receded

The FOMC statement sounded rather upbeat yet, after a lot of tossing and turning, the Greenback ended lower against its forex peers. What’s up with that?!

Major Events:

U.S. economic releases – Before the FOMC party started, the U.S. economy was already busy churning out one economic report after another. The results were mostly weaker than expected, as headline durable goods orders slumped 4.0% versus the projected 1.1% drop while core durable goods orders fell 0.5% instead of showing the estimated 0.3% uptick. Pending home sales posted a 0.2% gain, way short of the projected 1.9% increase.

Crude oil inventories The latest report from the U.S. Energy Information Administration showed a buildup of 1.7 million barrels instead of the expected draw of 2.1 million barrels, putting a pause to the streak of stockpile reductions since May. Black Crack prices chalked up another negative day, with WTI crude oil down to the $42/barrel level and Brent crude oil down to $43.53/barrel.

FOMC statement – The much-anticipated FOMC statement delivered in terms of market volatility, as traders adjusted their rate hike expectations after reading between the lines of the official announcement. Overall, the statement sounded upbeat since policymakers decided to upgrade their economic assessment and confirm that near-term risks have receded.

In particular, Fed officials highlighted the strengthening labor market and noted that household spending has been growing as well. FOMC member George dissented and voted for an interest rate hike right there and then, but majority of her peers thought it best to wait for more information before tightening. By the looks of it, market participants may be pricing in a September hike but for now, the positive vibes seem to have brought risk appetite back to the table.

Major Currency Movers:

USD – Even though the Fed dropped some hawkish beats in their latest statement, the Greenback was the biggest loser for the day when risk-taking surged.

EUR/USD initially dipped to a low of 1.0961 then zoomed up to a high of 1.1066 (+0.95%), GBP/USD hit a low of 1.3103 then rallied up to close at 1.3213 (+0.84%), USD/JPY tested the resistance near 106.00 but eventually slipped to 104.86 (-1.07%), and USD/CHF dropped sharply from a high of .9951 to a low of .9848 (-1.03%).

Comdolls – The Aussie and Kiwi shrugged off rate cut expectations for the moment and took advantage of the risk rallies while the Loonie put up a fight despite the buildup in oil stockpiles.

AUD/USD spiked to a low of .7421 then reversed to a high of .7505 (+1.15%), NZD/USD broke past its consolidation below .7050 to reach a high of .7077 (+0.38%), and USD/CAD fell from a high of 1.3252 to a low of 1.3132 (-0.90%).

Watch Out For:

  • 1:30 am GMT: Australia import prices q/q (1.6% expected, -3.0% previous)

See also:

Asian Session Recap

London Session Recap

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