The fireworks of the Asia Session have fizzled to sparks over the past few hours of London trading. Robust activity in the Carry Trade pairs sent shivers through the market, but confidence was regained on news of a sizable purchase ($7.5B) in a major global bank, injecting liquidity into the institution and confidence into global markets. A tremendous rally in assets of risk ensued (equities, the Carry Trade, etc.) ahead of European trading hours. Upon the entrance of London market players, a round of profit-taking in the Carry Trade was completed. From there, volume has slowly tailed off and currency pairs have consolidated in tight ranges. What appeared to be a very promising start to the London Session has deteriorated to an anti-climactic morning of below-average trading.
The currency pair in focus has undoubtedly been EURJPY. The cross has maintained its unofficial status as the proxy for the Carry Trade and continues to garner the attention of traders. At 0330 EDT (0830 GMT), the pair found its London bottom at the Asia breakout zone of 160.10, taking a page from Technical Analysis 101. From that level, we have seen a methodical move higher to technical resistance (moving average) at 160.85. Relative to the past few weeks, this 75 pip range (estimated) is extremely tepid. As of this writing, USDJPY has wandered within a 35+ point span from 108.00-35 as the heavy pair struggles to hold Asia gains. EURUSD has tracked the cross throughout London and now trades well above the 1.4815 low. Another currency pair worth a watch is USDCAD. Now about 900 points from the recent lows, the pair is currently at rates not seen since early October and is slowly clawing its way back to parity.
New York traders will be focusing on US equities and the reaction to the top story of the day (sovereign wealth fund investing in US global bank). In addition, there are two economic releases of note in the morning: S&P Case Schiller Home Price Index and November Consumer Confidence.
Upcoming Economic Data Releases (New York Session)
- 0900 EDT Q3 US S&P Case-Schiller Home Price Index YoY, consensus: -4.1% (relevance: medium)
- 1000 EDT November US Consumer Confidence, consensus: 91.0 (relevance: medium)
