The Euro had rallied up just shy of some key short-term resistance by 1.2925 on Monday, but was unable to take out the level to keep the pressure on the downside. Broader price action does not look to be risk favorable, with the Swiss Franc and Yen also remaining well bid and just off some recent key highs. This suggests that we could be in store for yet another round of declines in both Usd/Jpy and Usd/Chf and it will be worth keeping a close eye on these markets. Our in-house speculative sentiment index shows that retail traders are still overwhelmingly long Usd/Chf and Usd/Jpy to further support the case for another wave lower in these pairs.
The big event risk for the day is now behind us, with both the Bank of Japan and Reserve Bank of Australia making decisions on rates. As was widely expected, there was no change on the rate end from either bank, with the main market reaction seen in the Australian dollar after the accompanying RBA statement was more on the dovish side. The key takeaway from the RBA statement was that the global outlook was “somewhat uncertain.” This immediately weighed on the higher yielding currency and also forced another selloff in risk related currencies intraday.
Looking ahead, the European economic calendar is rather light with Swiss unemployment (3.6% expected) due at 5:45GMT, followed by German factory orders (0.5% expected) at 10:00GMT. Surprisingly, US equity futures are only flat following the latest wave of risk negative news, while oil has reacted and is nearly 1.0% lower on the day thus far. Gold on the other hand, trades flat.
Written by Joel Kruger
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