Article Highlights

  • U.S. ADP non-farm employment change up by 257K vs. 193K forecast
  • U.S. trade deficit narrowed from $44.6 billion to $42.4 billion
  • U.S. ISM non-manu PMI down from 55.9 to 55.3 vs. 56.0 forecast
  • U.S. factory orders down by 0.2% in Nov as expected
  • Crude oil inventories down by 5.1 million barrels
  • Canadian trade balance narrowed from 2.5B CAD to 2.0B CAD
  • WTI crude oil fell to $34/barrel levels
  • FOMC minutes: Dec rate hike was a close call for some
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Even with mixed U.S. economic reports, the Greenback managed to advance against most of its forex counterparts when risk aversion extended its stay in the markets.

Major Events:

FOMC meeting minutes – Remember when the U.S. central bank finally decided to hike interest rates in their December policy statement? Well, the transcript of their huddle suggests that the decision was actually a close call for some, with several members still worried about subdued inflationary pressures.

Still, the FOMC minutes revealed that almost all policymakers were in agreement that the conditions for policy normalization have already been met. In particular, Fed officials seemed pleased about the developments in the labor market and are seeing signs of stronger wage growth.

Crude oil inventories drop – Based on the latest report from the U.S. Energy Information Administration, crude oil stockpiles fell by 5.1 million barrels last week instead of rising by the projected 0.7 million barrels. While this usually eases fears of an oversupply and gives a boost to oil prices, market watchers paid extra close attention to the buildup in other energy resources such as gasoline and distillates.

With that, forex junkies couldn’t help but speculate that the demand for oil is starting to fade. WTI crude oil dipped below the $34/barrel level while Brent crude oil tumbled below $35/barrel.

Mixed U.S. reports – You win some, you lose some. Data from the U.S. economy was all over the place, with a couple of figures coming in better than expected and the rest falling short of expectations.

The ADP non-farm employment change for December chalked up a solid 257K increase in hiring, stronger than the estimated 193K gain and the previous 211K rise. In addition, the trade deficit narrowed from $44.6 billion to $42.4 billion, although this was spurred by a decline in both imports and exports.

Meanwhile, U.S. factory orders fell by 0.2% as expected in November while the previous reading was downgraded from from 1.5% to 1.3%. The ISM non-manufacturing PMI slipped from 55.9 to 55.3 instead of improving to the projected 56.0 figure.

Major Currency Movers:

CAD – The Loonie had another rough day, as it tumbled against its forex peers and hit fresh lows against the U.S. dollar.

USD/CAD rallied to a high of 1.4109 before retreating to 1.4085, CAD/JPY appears to be gearing up to break below the 84.00 handle, EUR/CAD is able to keep its head above the 1.5200 level, and GBP/CAD reached a high of 2.0640 before retesting support at 2.0600.

EUR – A bit of profit-taking was seen among euro pairs, as the shared currency rebounded against most of its rivals.

EUR/USD found support at 1.0750 and is trading at 1.0790, EUR/JPY bounced off the 127.00 major psychological support to 127.85, EUR/GBP has its sights set on the .7400 resistance once more, and EUR/NZD is closing in on 1.6300.

Watch Out For:

  • 12:30 am GMT: Australian building approvals (-2.8% expected, +3.9% previous)
  • 12:30 am GMT: Australian trade balance (-2.98B AUD expected, -3.25B AUD previous)

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