Currency Pair Overview Looking Ahead At A Clear European Schedule

Overall, the interest rate announcement played a much more important role than the equity markets, yesterday. The European pairs managed to rally against the dollar, despite the negative momentum the major indexes shared yesterday. This has not been happening lately. However, the yen was still not able to separate from its equity-link, so the pair touched a one-month low; the market was driven again by risk aversion. Ahead, the European calendar is clear of any major news events, but the beginning of the U.S. session the infamous Non-Farm Payroll is scheduled.

The Euro (EUR/USD) sold lower, ahead of the interest rate announcement, falling 170 pips. During Mr. Trichet’s speech, the pair had a very powerful swing, reversing and rallying almost 200 pips. The euro finished the day gaining 60 pips, even though many analysts would not have expected this to happen.

The Pound (GBP/USD), similar to the euro, tumbled a strong number of pips yesterday, before the interest rate announcement. Soon after, the pound started to move higher and for a short period, the pair recovered every pip lost earlier. Lately, the pound sold strong, making a new low against the dollar, and against the euro, reaching its lowest point in the last 12 years.

The Aussie (AUD/USD) traded in a wide range again, yesterday. The aussie failed another test at the 20-day moving average yesterday, for the fourth week in a row. On the downside, the 0.6400 and 0.6300 areas seem to be a strong support level for the aussie, as the recent price action shows. 

The Australian construction sector decreased to 32 in November from a 36.4 the previous month. The sharpest decline seen in the subcomponents was apartment construction, which fell from 30.7 to 23.8. Input prices also saw a steep drop from 83.3 to 76.3 for November. The new orders index and activity index also saw marginal declines as the employment index fell nearly six points to 29.8. The housing sector in Australia has been contracting since March of this year.

The Cad (USD/CAD) strengthened for the seventh consecutive day yesterday. The pair gained 240 pips, almost as much as in the first six days of the uptrend, taken together. Lately, the cad has been pulled higher by the ongoing declines in the commodity markets and by the poor reports the Canadian economy posts. The cad fell 30 pips since the new trading day had started.

The Swissy (USD/CHF) fell 130 pips yesterday, reversing every gain the pair posted during the early trading hours. The swissy rose 100 pips in the overnight session, but soon after, started to move lower, being dragged by the strong link with the euro. In the Asian session, the swissy gained 40 pips.

The Yen (Usd/Yen) managed to break lower yesterday, a move that the market has been expecting for a some time now. After a lot of whipsaws during the late European session and the U.S. trading hours, the yen managed to break under the 92.50 support area, falling all the way down to TheLFB S1 (92.00). In the next few days, these levels will probably be tested again.