It was another wild and volatile Asia session on Thursday, one that well complemented the unusual price action of the last 24 hours.  The New York session saw the greenback crumble to historic lows, and another round of “Carry Trade Unwind”. Where a massive sell off in US equities and the steep decline in the equally risky crosses was attributed to ongoing bad news related to the credit crisis, today’s Asia session opened with currency traders throwing risk to the wind causing the high yielders to squeeze sharply higher. 

Aside from Australia employment numbers, which caused its own 25+ pip move in AUDUSD, most of the major moves occurred in the high yielding JPY crosses shortly after the New York close.  After dealing all the way down to the 164.00 area, where EURJPY seemed to finally find bids, risk aversion became yesterday’s theme.  The pair caught an eye opening bid higher, as bargain hunters stepped in.  In a rapid move, EURJPY dealt 160+ pips through previous levels of significance and in to the 165.60s.  The other JPY crosses followed suit, with AUDJPY darting higher by 140+ points into the 104.70s and NZDJPY moving 150+ pips from the 86.00 level and into the 87.50s.  Also important to note, USDCAD was once again in play during the session, dealing 350+ pips from early New York lows in the .9060s to .9400.  The pair would eventually give back nearly 100+ pips into late Asia trading, but found some medium term support around .9280.

Ahead in London, Forex traders can certainly expect continued volatile price action.  Global equities, specifically the financial sector, will be the area of focus once again for European traders.  However, the most important events of the session will come towards the end, with both the Bank of England and the European Central Bank set to make interest rate decisions followed by the ever important statement regarding monetary policy.  Any deviation from  the expected hawkish tone, could send the dollar flying and EURUSD and GBPUSD off record levels.   

Upcoming Data Releases (London Session):

  • UK: 0600ET BoE Rate Decision; Consensus 5.75% (no change)
  • EC: 0645ET ECB Rate Decision; Consensus 4.00% (no change)