FOREX TRADING

It has been a nervy afternoon’s trading after a surprise plunge in US equity indices whiplashed FX markets and particularly JPY-crosses into risk aversion mode. The S&P index rapidly dropped around 1.3% shortly after the US open, seemingly with no news headlines triggering the move. The unexpected shock sent EURJPY plummeting from 129.25 to 128.25 in a matter of seconds, and after taking out the 2 month uptrend support at 128.15, we have now touched lows of 127.54. Until that point, risk sentiment appeared to be stabilizing; early USD gains had been gradually pared back during the day after Goldman Sachs reported much better than expected earnings and an IMF spokesperson was quoted as saying there was no expectation for Greece to request financial help from the IMF which eased some concerns about sovereign default. US claims data released earlier in the session had been higher than consensus estimates, but still relatively benign in their effect on FX markets (initial claims 482k vs. 440k expected, continuing claims 4599k vs. 4598k expected). The Philadelphia Fed index missed forecasts (15.2 vs. 18.0 expected), but US leading indicators increased more than expected (1.1% vs. 0.7% expected). Also released during the afternoon was the BoC’s Monetary Policy Report, followed by the usual press conference with Governor Carney. There were very few new developments from the recent BoC meeting statement, but there was a repetition of the currency-specific comments that CAD strength combined with the absolute low level of US demand would continue to dampen exports.

Since that point however, the equity market slump has dominated price action, with EURUSD dragged back towards session lows around 1.4050, and gold taking out major support levels at $1195 to touch a low of $1089.85. We still look for gold to head towards the head-and-shoulders target of $1080 after the break of the neckline support at $1119 yesterday. Still to come, it has been announced that US President Barack Obama with speak at 17:40 CET to “offer proposals to limit financial institutions’ size and trading activities”. We expect jittery markets to persist until this event is out of the way.

AC Markets
http://www.ac-markets.com

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