- CA housing starts: 193K vs. 195K expected, 203K previous
- US non-farm productivity: 1.3% vs. 1.6% expected, -1.1% previous
- US unit labor costs: 0.5% vs. 0.0% expected, 2.3% previous
- US wholesale inventories: 0.9% vs. 0.4% expected, 0.6% previous
- UK CB leading index: -0.2% vs. -0.4% previous
- OPEC increases oil supply forecasts from non-member countries
- Commodity prices hit by yuan devaluation and strong dollar
The dollar was king of pips during yesterday’s U.S. session trading, as forex traders priced in a bit of risk aversion in the markets.
We didn’t see a lot of major data from Uncle Sam yesterday, so forex traders had a lot of time to price in news from the earlier trading sessions. More specifically, they reacted to China’s decision to lower the yuan’s reference rate by 1.9%, its biggest one-day drop since China ended the dual-currency system in 1994. Aside from uncertainty, a weaker yuan signals lower purchasing power of consumers from the world’s second largest economy.
EUR/USD popped to an intraday high of 1.1088 before settling back down to 1.1044 while USD/JPY popped up by 20 pips (+0.16%) to 125.08 and USD/CHF rose by 45 pips (+0.46%) to .9883. Meanwhile, GBP/USD was stuck in a tight range just above 1.5550.
Adding to the risk aversion mix is the decline in commodity prices. Overall dollar strength might have factored in, but oil traders also had to deal with the Organization of the Petroleum Exporting Countries (OPEC) raising its oil production estimates from non-member countries. If you recall, worries of global oversupply of oil have been weighing on the commodity for months.
AUD/USD fell by another 20 pips (-0.27%) to .7302 while NZD/USD also suffered another 11-pip drop (-0.17%) to .6540. USD/CAD ended the session 46 pips higher (+0.35%) after hitting an intraday high of 1.3150.
Will the comdolls take more hits from Asian session forex traders? The Bank of Japan (BOJ) is set to print its monetary policy meeting minutes at 11:50 pm GMT. The central bank didn’t make any changes to its policies last week, but keep an eye out for any hints of future actions from the BOJ.
Australia also has a couple of reports due including the Westpac consumer sentiment at 12:30 am GMT and quarterly wage price index (expected at 0.6% like last month) at 1:30 am GMT. Significant hits or misses on the reports could cause minor extensions or retracements of yesterday’s bearish moves.
At 4:30 am GMT we’re getting back to Japan with its final industrial production numbers and capacity utilization report. The releases might be overshadowed by China’s reports at 5:30 am GMT though, as it’s also set to print its retail sales (expected at 10.6% like last month), industrial production (expected at 6.6% vs. 6.8% previous) and fixed asset investment numbers (expected at 11.5% vs. 11.4% previous).
With lots of traders turning their spotlight on China’s economy, you might want to stay glued to the tube for the reports’ possible effects on risk-taking over the next couple of hours.
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Head on to Big Pippin’s Daily Chart Art for some pip-locking technical setups!