Article Highlights

  • U.S. economy grew 0.7% in Q4 2015 vs. 0.8% forecast, 2.0% previous
  • U.S. business investment down by 1.8% in Q4
  • Chicago PMI up from 42. to 55.6 vs. 45.4 forecast
  • Canadian monthly GDP up by 0.3% in Nov as expected
  • Canada’s raw materials price index fell by 5.0% in Dec vs. -3.8% forecast
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Forex traders gobbled up higher-yielding currencies, as risk appetite was present in the financial markets before January came to a close. Can this risk-on mood last?

Major Events:

U.S. Q4 2015 GDP release – Forex market watchers got their first glimpse of how the U.S. economy fared during the last quarter of 2015 through the advanced GDP release. The report showed a 0.7% growth figure, weaker compared to the estimated 0.8% expansion and the previous period’s 2.0% reading.

Components of the report revealed that consumer spending was still mostly accountable for the positive reading while business investment chalked up a sharp 1.8% decline, as companies struggled to adjust to weaker external demand and falling price levels.

Commodity price bounce – Conflicting reports on a possible OPEC emergency meeting to cut production continued to push crude oil prices this way and that, as speculations of a Russian deal with the oil cartel hit the newswires. Word through the grapevine is that Russia plans to have a meeting with OPEC leaders this month to come up with a compromise on production levels, but reps from the Gulf states said that nothing has been scheduled yet.

Still, hopes of a production cut allowed WTI crude oil to hold its ground above $33/barrel and Brent crude oil to bounce to $35.42/barrel. Gold prices popped up to $1,127.20/ounce while silver has managed to tread carefully around $14.250/ounce.

More signs of trouble in Canada? – Even though Canada’s monthly GDP reading for November came in line with expectations of 0.3% growth, its leading inflation indicators hinted at darker clouds on the horizon. The raw materials price index logged in a jaw-dropping 5.0% drop versus the projected 3.8% decline due to the – surprise, surprise – crude oil slump.

Meanwhile, the industrial product price index showed a 0.2% drop, its fifth consecutive monthly decline. This was also led by a fall in energy and petroleum products, followed by lower prices for fish, meat, and dairy items.

Major Currency Movers:

CAD – Despite downbeat economic figures from Canada, the oil-related Loonie managed to squeeze out some gains, thanks to the pickup in crude oil.

USD/CAD dipped briefly below the 1.4000 handle to a low of 1.3964, CAD/JPY surged to a high of 86.94, EUR/CAD broke below the near-term support at 1.5200 to a low of 1.5144, and GBP/CAD breached the 2.0000 major psychological mark onto a low of 1.9872.

JPY – The Japanese yen was still reeling from the impact of the BOJ’s decision to implement negative deposit rates, although it managed to trim its losses before the weekend.

USD/JPY retreated from a high of 121.68 to close at 121.08, EUR/JPY found resistance at the 132.00 mark then ended at 131.11, GBP/JPY was unable to make any headway past 174.00 then closed at 172.49, and AUD/JPY is still consolidating below the resistance at 86.00.

Watch Out For:

  • 12:30 am GMT: Chinese official manufacturing PMI (49.6 expected, 49.7 previous)
  • 12:45 am GMT: Chinese official non-manu PMI (54.4 previous)
  • 1:45 am GMT: Chinese Caixin manu PMI (48.1 expected, 48.2 previous)
  • 2:00 am GMT: Japanese final manu PMI (no change from 52.4 expected)
  • 5:30 am GMT: Australian commodity prices y/y (-23.3% previous)

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