U.S. Session Forex Recap – July 29, 2016

  • U.S. initial jobless claims at 266K vs. 261K forecast
  • U.K. GfK consumer confidence index down from -9 to -12
  • New Zealand building consents surge by 16.3%

The Greenback reigned supreme against its forex peers, closely trailed by its fellow lower-yielders, the Japanese yen and the Swiss franc. What’s going on?

Major Events:

Profit-taking ahead of BOJ? – Forex moves from the earlier trading sessions seem to have gotten reversed during the latter part of the New York trading sessions, as market participants probably thought it best to close some of their positions ahead of the highly-anticipated BOJ decision. Word through the grapevine is that the Japanese central bank might increase their stimulus program to 90-100 trillion JPY, up from their current 80 trillion JPY in annual JGB purchases.

Signs of trouble in Europe Another set of factors that likely brought risk aversion back to the mix are the signs of trouble in Italy’s banking sector and in Spain’s government.

As it turns out, a group of large banks and institutional lenders declined a proposal to provide a cash boost to Italy’s Monte Paschi, possibly putting pressure on the country’s and the region’s banking sector. This bank has already been bailed out twice by the state in the past two years but it looks like it’s set to fail the European bank stress tests due on Friday.

Meanwhile, the King of Spain has asked Prime Minister Mariano Rajoy to face a confidence vote after the recent elections failed to produce a majority government. Rajoy has mentioned that he is open to talks with other political parties as he scrambles to come up with enough support to win the confidence vote.

Major Currency Movers:

USD – The dollar recovered across the charts as risk aversion seems to be weighing on the markets once more.

EUR/USD retreated upon hitting a high of 1.1110 to a low of 1.1067 (-0.38%), GBP/USD fell from 1.3194 to a low of 1.3117 (-0.58%), AUD/USD started off at .7523 then closed at .7502 (-0.28%), NZD/USD dropped from .7085 to .7062 (-0.32%), and USD/CAD found support at the 1.3100 handle and bounced to a high of 1.3192 (+0.70%).

EUR – The shared currency carried on with its slide from the earlier trading sessions since the European banking sector seems to be under some pressure.

EUR/GBP slipped from the .8450 area to a low of .8416 (-0.40%), EUR/AUD is down from 1.4774 to 1.4736 (-0.26%), EUR/CHF tumbled from 1.0900 to 1.0850 (-0.46%), and EUR/NZD dropped from 1.5693 to close at 1.5651 (-0.27%).

Watch Out For:

  • 11:30 pm GMT: Japanese household spending y/y (-0.4% expected, -1.1% previous)
  • 11:30 pm GMT: Tokyo core CPI (-0.4% expected, -0.5% previous)
  • 11:30 pm GMT: National core CPI (-0.5% expected, -0.4% previous)
  • 11:50 pm GMT: Japanese retail sales y/y (-1.2% expected, -2.1% previous)
  • 11:50 pm GMT: Japanese industrial production m/m (+0.6% expected, -2.6% previous)
  • Tentative: BOJ policy statement and press conference (See Forex Gump’s Trading Guide!)

See also:

Asian Session Recap

London Session Recap

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