There is not much stranger in the exciting world of FX trading than a fixing that happens on a Friday, on the last trading day of the month. This is because all expiries from daily, weekly, and monthly trades are coming in on the same day, at the same moment of time. This tends to make the markets act a little strangely.
It was no different on the previous Friday, as July was coming to an end and we saw the EURUSD, GBPUSD, and AUDUSD move higher aggressively. The reason for the initial move was attributed to poor US economic data, but I would say it was a fixing that related as all pairs were pretty fairly bid all day.
However, markets move for a reason, and that reason came from the United States in the form of income growth reports. It turned out that this was at its slowest rate since records began, and this saw the US dollar tumble all over the dashboard.
EURUSD touched above 1.11, GBPUSD above the 1.5660 area, and USDJPY broke into 124.50. Then the fixing made everything reverse, and all those moves were simply forgotten.
The one pair really stood out, and that was the USDCAD. At the same time the US data was released, the Canadian GDP was released, and it sowed contraction in Canada, somehow justifying the Bank of Canada’s rate cut that was delivered in July. However, the US data was so surprising that the pair dipped from almost 1.31 to 1.2930 but only to bounce back on the very same day and close the day, week, and month in 1.31.
This is FX trading, and this is why it is so difficult to survive in such a trading environment. This week’s conditions should be similar, as the NFP (Non-Farm Payrolls) in the United States is to be released.
The FOMC (Federal Open Market Committee) in the United States expressed a willingness to start raising rates, but it needed more jobs to be created first. This makes this NFP and the September one, key to any future rate hikes in America.
All eyes will be on the ADP (private payrolls number) on Wednesday for any clues it may give. On Friday, besides the actual NFP number, labor participation rates will be key as well, as it may make the initial release pale and so the initial reaction to be different.
It’s going to be a wild ride in the FX markets and usually, in such a trading week, the start of the week is a ranging one and as of Thursday, the real moves and positioning will start.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
