Article Highlights

  • Moody’s cuts Japan’s debt rating by a notch from AA3 to A1
  • US manufacturing PMI up to 54.8 vs. 55.0 reading expected, 54.70 reading previous
  • US ISM manufacturing PMI clocks in at 58.7 vs. 58.0 expected, 59.0 previous
  • Gold and oil prices made impressive recoveries and boosted the comdolls
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Rebound was the name of the game during the late London and early U.S. session trading, as forex players priced in a couple of updates on commodities.

Commodity prices were front and center of price action yesterday, thanks to oil prices rocketing on speculations that the recent tumble in oil prices have started to affect the production of U.S. shale oil. Brent crude oil jumped by almost 3% to $72.54, its largest gain since October 2012. WTI crude oil also popped up by $3.21 to $69.35.

Not surprisingly, the Loonie took advantage of the rebound in oil prices. USD/CAD plummeted by 72 pips to 1.1329, CAD/JPY jumped by 62 pips to 104.45, EUR/CAD fell by 87 pips to 1.4128, and GBP/CAD dropped by 82 pips to 1.7831. Yowza!

Gold was also under the spotlight yesterday as it recovered from its three-week lows after Swiss voters rejected the proposal that the SNB would be required to hold 20% of its reserves in gold. Prices were already rising in early London trading but short covering and a rally in oil prices further fueled appetite for the commodity. By the end of the day gold had its best performance in 14 months with its 4% climb to just above the $1,200 handle.

The gold-related Aussie didn’t catch much of the gold’s move, probably because it’s being held back by not-so-stellar PMI reports from China released during the Asian session. AUD/USD was only up by 10 pips to .8502 while AUD/JPY gained 9 pips to 100.61 and EUR/AUD slipped by 15 pips to 1.4668.

Instead, it was the low-yielding dollar that reacted to the rally in commodity prices. The Greenback was sold across the board in early U.S. session trading, as EUR/USD popped up to an intraday high of 1.2507, GBP/USD jumped to 1.5764, and USD/JPY dropped to an intraday low of 117.88. Luckily for dollar bulls, solid upticks in Uncle Sam’s manufacturing PMI reports were enough to stem the currency’s selloff.

EUR/USD finished the session only 3 pips higher at 1.2471, GBP/USD closed with 27-pip gain to 1.5739, and USD/JPY capped the day at 118.33.

Let’s see if Asian session traders pick up on yesterday’s commodity-centric price action themes. The Aussie will likely be in the headlines with Australia printing better-than-expected building approvals and current account numbers today. Not only that, but the Reserve Bank of Australia (RBA) is also set to print its monetary policy decision at 4:30 am GMT.

The central bankers won’t be meeting again until February 2015 so market players are expecting the RBA to reiterate its points, mainly that its current rates are promoting a period of stability, and that the Aussie is still historically high. Still, keep your eyes peeled for any surprises that might affect the Aussie’s intraday trends!

See also:

London Session Recap

Bonnie and Clyde, peanut butter and jelly, Justin Bieber and his hair. Some things just go well together.

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