Article Highlights

  • China Q4 2015 GDP (y/y) misses estimates with drop from 6.9% to 6.8%
  • China industrial production also misses with 5.9% growth vs. 6.0% uptick expected, 6.2% previous
  • China retail sales: down from 11.2% to 11.1% vs. 11.13% expected
  • China fixed asset investment (ytd/y) down from 10.2% to 10.0%
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Forex price action was as mixed as my laundry colors, as traders priced in worries over Iran’s oil hitting the markets and a few changes from the PBoC.

Major Events:

Chinese data dump – The biggest story of the hour was China printing an onslaught of weaker-than-expected reports. Growth in Q4 2015 from a year earlier clocked in at 6.8%, weaker than the expected 6.9% uptick and marked the weakest quarter since the global recession in 2009. For reference, the government is targeting at least a 6.5% growth through 2020.

The rest of the releases didn’t fare any better. Industrial production only grew by 5.9% in December from a year earlier, not only weaker than November’s 6.2% reading but is also the weakest in about 25 years. Meanwhile, retail sales only popped up by 11.1% from last year when analysts had estimated an 11.3% growth. Last but not the least is fixed asset investment only rising by 10.0%, its slowest pace since 2000. Overall the numbers projected that the government is still on shaky ground when it comes to leading the economy from a manufacturing-based growth to a consumer-led expansion.

PBoC’s moves calm the markets – Luckily for risk-lovin’ traders, market players mostly shrugged off China’s weak numbers (either that or no one’s believing the headline numbers anymore) and concentrated instead on the PBoC’s additional attempts to stabilize the markets. For instance, the central bank had weakened the yuan for another day, this time adding an 80B yuan worth of cash injections via 7-day reverse repos and 75B yuan worth of 28-day reverse repos. Talk about meaning business!

Stabilizing oil prices – The Black Crack took a breather from its losses yesterday after OPEC hinted that oil demand as well as the oil supply glut would improve in 2016. Brent crude is up by 0.90% while WTI also inched 0.12% higher throughout the session.

Major Currency Movers:

AUD – Since Australia’s exports rely a lot on China’s demands, the high-yielding currency was affected the most by today’s Chinese data dump. Surprisingly, the Aussie shrugged off the weak readings after a bit of weakness. Maybe a sell-the-rumor-buy-the-news scenario or are Aussie traders just tired of selling the comdoll?

AUD/USD fell to a session low of .6839 before ending the session at .6873 while AUD/JPY also hit a low of 80.20 before recovering to 80.80. Ditto for EUR/AUD, which ended the session 14 pips lower after hitting a session high of 1.5944.

CAD – The oil-related Loonie caught some breaks against its counterparts thanks to a bit of recovery in oil prices. USD/CAD fell by 49 pips (-0.34%) while CAD/JPY jumped by 42 pips (+0.52%) and EUR/CAD fell by 59 pips (-0.37%).

GBP – With the U.K. CPI report only a few hours away, pound traders are erring on the side of caution and taking profits on their recent pound shorts. GBP/USD inched 9 pips higher (+0.06%) while GBP/JPY also rose by 41 pips (+0.25%) as EUR/GBP slipped by 7 pips (-0.09%).

Watch Out For:

  • 7:00 am GMT: German final CPI expected to remain at 0.3%
  • 8:15 am GMT: Swiss PPI expected to print 0.2% decline vs. 0.4% uptick last month
  • 9:00 am GMT: Euro Zone current account to print 19.3B EUR surplus vs. 20.4B EUR surplus last month
  • 9:30 am GMT: UK CPI expected to remain at 0.1%
  • 9:30 am GMT: UK core CPI expected to remain at 1.2%
  • 9:30 am GMT: UK PPI input prices: -1.4% expected vs. -1.6% previous
  • 9:30 am GMT: UK PPI output prices expected to remain at -0.2%
  • 9:30 am GMT: UK RPI (y/y): 1.0% expected vs. 1.1% previous
  • 9:30 am GMT: UK house price index (y/y) expected to grow by 7.3% vs. 7.0% last month
  • 10:00 am GMT: German ZEW economic sentiment to drop to 8.2 vs. 16.1 previous?
  • 10:00 am GMT: Euro Zone final CPI (y/y) expected to remain at 0.2%
  • 10:00 am GMT: Euro Zone final core CPI (y/y) not expected to change from 0.9%

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