- Chinese central bank cut interest rates and RRR over the weekend
- BOJ also ready to act if Greek crisis triggers market crash?
- German and Spanish preliminary CPI due
Asian session forex traders woke up eager to price in the market happenings over the weekend, resulting to huge gaps for several currency pairs. Most notably, the euro opened significantly lower across the board after the ECB refrained from increasing its Emergency Liquidity Assistance (ELA) fund and resulted to capital controls being implemented in Greece.
EUR/USD started the week 50 pips lower than its Friday close and is testing support at 1.1000 (-1.39%), EUR/JPY is struggling to stay above 135.00 (-2.43%), and EUR/GBP just broke below the .7100 key support area (-1.08%). The euro is also trading lower against the commodity currencies, with EUR/NZD down 231 pips (-1.41%), EUR/AUD down 195 pips (-1.34%), and EUR/CAD down 178 pips (-1.30%).
The comdolls drew a bit of support from news that the Chinese central bank went on another easing spree over the weekend. The PBoC decided to cut lending and deposit rates by 0.25% while also announcing a reduction in their reserve ratio requirement, which is the amount of cash that banks are supposed to leave in the central bank’s vault. These moves are aimed at keeping further losses in check for the Chinese stock market but could also give overall economic performance a boost. Talk about hitting two birds with one stone!
AUD/USD also gapped down over the weekend but this gap was quickly filled when price shot up to a high of .7690 (+0.01%). NZD/USD kicked off the week at .6817 then surged to a high of .6864 (+0.08%) while USD/CAD is still working on filling its gap and is up 15 pips (+0.12%).
Yen pairs weren’t left behind in the volatility party, as sources from the BOJ said that the central bank might be ready to pump up short-term liquidity if the Greek crisis triggers a global market crash. USD/JPY dipped to a low of 122.13 then jumped up to a high of 123.16 before sliding back to 122.60 (-0.96%), EUR/JPY fell briefly below the 134.00 handle then popped up to 135.65 (-2.41%), and GBP/JPY tossed and turned by more than 100 pips as well (-1.21%).
Up ahead, the forex calendar shows that the German and Spanish preliminary CPI readings are up for release in the London trading session. This might not have such a huge impact on the euro since traders are more focused on what’s going on in Greece and how it could affect European equity markets today. The U.K. is set to print data on net lending to individuals and mortgage approvals which might push pound pairs around.
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