Market Session Recaps

London Session

Mon, May 12 2008, 12:04 GMT
by Forex.com Research Desk

FOREX.com


The opening London Session of the week has seen a continuation of high volatility, offering traders the fates of victory or defeat in a merciless fashion. The market has lacked forgiveness, with even skilled traders unable to trade around positions on the wrong side. The dominant theme of the day came via UK inflation data, which surged to the highest level since 1995. Following an early US dollar bid, the British Pound took center stage and rocketed higher with the release. The secondary story has revolved around a very soft Japanese Yen. The currency has forfeited gains from last week's risk aversion trade and now sits on the defensive.

The opening London price action has been typical of the movement seen recently, characterized by directional dips and pops abruptly halted and immediately reversed. This whippy trading occurred again, best shown in both EURUSD and GBPUSD. The pairs plunged at a rapid pace to lows of 1.5365 and 1.9440 respectively. Just as it appeared a climactic sell off (USD rally) was to ensue, traders aggressively twisted the currencies in the opposite direction. Short-covering quickened the pace of the rebound as Cable plowed to 1.9500 heading into the 0830 GMT (0430 EDT) release of April Producer Prices. The robust readings soared past estimates and sent the British pound off to the races, with GBPUSD ascending a full big figure as of this writing.

The US dollar had fared well prior to the UK inflation numbers, but crumbled thereafter. The lone exception has been USDJPY, which has led methodical rise to levels just shy of 104.00. Running in tandem has been EURJPY, which has arguably been the biggest winner on the day. Once the cross took out 159.50 resistance, it bullied its way higher, clearing a path to a 160.40 high. In a possible reversion back to the ''risk'' trade, the high-yielders have lifted as well, with AUDUSD adding 90 pips from its 0.9355 London lows.

The New York economic agenda is very light, so expect these UK headlines to continue to be the chatter across trading desks. Lastly, lest we forget, crude oil is hovering in the stratosphere of $126/barrel at the moment, numbing those that pay at the pump into pure denial.  
 

Upcoming Economic Data Releases (New York Session)

  • 0830 EDT Canada – Mar New Housing Price Index MoM, consensus: +0.2% (relevance: low)
  • 1400 EDT US – Apr Monthly Budget Statement, consensus: +$160.0B (relevance: medium)

Published on  Mon, May 12 2008, 12:09 GMT

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