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Market Session Recaps

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London Session

Fri, Dec 28 2007, 15:58 GMT
by Forex.com Research Desk

FOREX.com


The final London Session of a very quiet holiday week (Christmas, Boxing Day) has brought an increase in trading activity, but market conditions remain firmly inferior to the healthy backdrop to which we have become accustomed. Both volume and volatility came sporadically, frustrating market players with directional, illiquid price movement.  The main theme for the day has been simple: an aggressive reversal of the Asia Carry Trade sell off.  

Equity markets in the US took a dive yesterday as various headlines (Pakistan assassination, speculation of increased write-offs, etc.) sparked a round of risk reduction. Currencies held their ground – or lagged, depending on your perspective - until Asia opened. At the start of the new day, the Carry Trade was slaughtered (unwinding of risk), led by a EURJPY plunge from 166.50 to 165.00. The component of the cross to take the most pain was USDJPY, which also slid over a big figure (100 pips).

As London neared its open, those dedicated traders that were in the office eyed the European bourses for the future direction of the FX market - - - just as the US market provided an indication for the Asia Session. Though still negative, European equities fell less than their American counterparts, serving as a catalyst for Carry Trade buying (assumption of risk). The price action was fierce as far as amplitude, but weak by measure of conviction. Traders simply piled on “the path of least resistance” and easily drove currencies up a one-way street. All told, the currency market sits little changed from the New York close, though the day has provided the most activity of the week.

Upcoming Economic Data Releases (New York Session)

  • 0945 EDT US Dec Chicago Purchasing Mgrs. Index, consensus: 51.7 (relevance: medium)
  • 1000 EDT US Nov New Home Sales, consensus: +717k, -1.6% MoM (relevance: medium)
  • 1000 EDT US Nov Help Wanted Index, consensus: 23 (relevance: low)

Published on  Fri, Dec 28 2007, 15:59 GMT


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