Forex headlines for August 6, 2014:
- June 2014 US trade balance -41.54bn vs -44.7bn exp
- US Q2 GDP estimates moved 0.1 to 0.4 pp higher after trade balance
- June 2014 Canadian trade balance +1.86bn vs 0.0bn exp
- UK July NIESR GDP estimate +0.6 vs +0.9% exp
- US Secretary of Defense sees ‘possibility’ of Russian troops entering Ukraine
- Italy’s Padoan says Italy must pursue reforms to emerge from recession
- Bond king says those worried about mortgage market are “fighting the last war”
- Second senior Bank of England official quits in one week
- S&P 500 flat at 1920.21
- Gold up $18 to $1306
- WTI crude down 43-cents to $96.96
- JPY leads, GBP lags
A round of USD/JPY selling struck like a bolt of lightening. The pair fell more than 40 pips in a minute at 12:14 pm ET and it led to wave of broad yen buying and US dollar selling. Traders scrambled to find headlines and an explanation but sometimes there are just no answers. Certainly some kind of squeeze was at work after the initial move got going. The first thinking was that some kind of fat finger was involved but you’d like we’d have more of a retracement by now.
Traders are eying the futures market where more than 50k contracts traded hands in minutes compared to most hours when 5-10k contracts trade hands. USD/JPY fell to 101.78 from 102.35 but in the next hour about half the move retraced and the pair is at 102.05. Other yen pairs were swept up in the action; a big one was EUR/JPY as it broke the Feb low and touched the worst level since December at 103.16.
The rest of the market was caught in the turmoil to different extents. EUR/USD climbed about 20 pips to 1.3380 initially but gave back all the gains in the minutes afterwards in a sign of how eager traders are to sell rallies. But with the uncertainty around the ECB tomorrow others took it as a sign to pare euro shorts and the pair rose as high as 1.3387 later before settling around 1.3380.
Cable was the laggard heading into US trading after soft industrial production numbers but it was staging a modest comeback. The spike sent the pair to 1.6858 from 1.6835 then it was a sideways chop in the 1.6845/55 zone.
The Australian dollar was moderately stronger in US trading as shorts headed to the exits ahead of today’s Aussie jobs report. The the market snapped back on the flash dollar slump in one of the bigger moves as buy stops sent the pair to 0.9374 from 0.9325. The move hit BofA’s stop in a trade recommendation released yesterday. Afterwards AUD/USD slipped back to 0.9350.
USD/CAD was weak throughout the day after the best Canadian trade balance report in 2.5 years. A rumored barrier at 1.10 stalled the momentum higher in Europe and then the data sent it on a long slide to 1.0913. We’re near the lows now.
