Following an explosive New York session which saw a resurgence of the greenback, currency traders geared up for what they anticipated to be another wild Asia session. They weren’t disappointed. Although the previous session’s story line seemed to be a stronger dollar, the high yielding JPY crosses took center stage in Asia. Despite a sharp selloff in US equities towards the close in New York, Forex traders flocked to the carry pairs to buy on dips.
The JPY crosses caught a bid right from the gate, and rose in a somewhat steady move higher for most of the session. Traders took advantage of larger than ordinary price ranges for these pairs, continuing to pile into long positions. Beginning the session near the 158.10s, EURJPY shot higher, taking out level after level. Nearly 200+ pips later the pair had managed to deal back over the 161.00 handle. GBPYJPY also saw a significant swing, a whopping 350+ pips, taking the market by surprise. Dealing off lows near 224.20 at the beginning of the session, Forex investors seeking “riskier assets” bid the pair to highs near 228.00, before slightly retreating. AUDJPY & NZDJPY also enjoyed impressive moves, each improving by 200+ pips.
The JPY cross buying throughout the session didn’t compliment the USD well. Currency traders forced the greenback to surrender a portion of its earlier gains. AUDUSD jumped 150+ pips from lows near the .8750s to the .8900 area, where it met fierce resistance. Reports indicated that a large bank was sitting on the offer. GBPUSD also rose 150+ pips and dealt back over the 2.0600 level, after giving up nearly 300+ points during the last 24 hours. EURUSD saw a relief bounce too, after impressively holding the 1.4500 handle, the pair took back 50+ pips to deal near the 1.4580s mark during the session.
Ahead in the upcoming London session, a good amount of top tier data is expected, including a BoJ rate decision in the early hours. In Europe, traders will be focusing on the ever volatile UK CPI numbers, as well as German ZEW numbers. However, most importantly, price action in the JPY crosses and the dollar will likely be the main catalyst for the session. With uncertainty caused by a steady stream of bad news from multiple financial institutions, and the extreme volatility that has recently engulfed the market, traders will continue to read the tape for clues.
Upcoming Data Releases (London Session):
- UK: 0430 CPI (MoM); Consensus .3%
- CPI (YoY); Consensus 1.9%
- Core CPI (YoY); Consensus 1.7%
- GE: 0500 ZEW(Econ. Sent.); Consensus -20
- ZEW(Current Situation); Consensus 67
