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MARKET DEVELOPMENT – JPY OUTPERFORMS, USD BUOYED BY GDP

JPY: Risk off sentiment has continued to spur safe haven flow in the Yen, which has gained over 3% on an equally weighted basis. A combination of uncertainty regarding trade wars, Brexit and Italian politics has increased global market volatility over the past few weeks and with risk sentiment remaining fragile, the JPY will look to hold on its elevated levels. USDJPY has yet to make a firm break of the 112.00 handle, which also coincides with the rising trendline.

USD: The US Dollar continues to push for better levels with the index moving to within a whisker of the 2018 high. Better than expected GDP data for Q3 suggests that despite the recent market turmoil, the underlying economy remains robust.

CNY: The Chinese Yuan continued to weaken against the greenback hitting fresh low multi month lows as the PBoC set the Yuan fix beyond 6.95 for the first time since Jan 2017. Eyes are on the 7.00 handle as the offshore Yuan slips. However, the Yuan did receive some slight support after source reports highlighted that officials view USD/CNY at 7.00 as an important level and would likely intervene at that stage to prevent a rapid depreciation.

EUR: Despite Draghi’s upbeat tone yesterday, the Euro failed to crack above resistance at 1.1430. As concerns continue to mount with Italy, the Euro had tracked lower, hitting lows of 1.1336. Near term support for the pair is situated at 1.1301, which marks the YTD low.

DailyFX Economic Calendar: Friday, October 26, 2018 – North American Releases

JPY Outperforms, Yuan Recovers on Intervention Rumours - US Market Open

DailyFX Webinar Calendar: Friday, October 26, 2018

JPY Outperforms, Yuan Recovers on Intervention Rumours - US Market Open

IG Client Sentiment: USDJPY Chart of the Day

JPY Outperforms, Yuan Recovers on Intervention Rumours - US Market Open

EURUSD: Data shows 61.6% of traders are net-long with the ratio of traders long to short at 1.6 to 1. In fact, traders have remained net-long since Oct 01 when EURUSD traded near 1.16046; price has moved 1.8% lower since then. The number of traders net-long is 0.4% higher than yesterday and 27.2% higher from last week, while the number of traders net-short is 4.7% higher than yesterday and 12.7% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EURUSD prices may continue to fall. Positioning is less net-long than yesterday but more net-long from last week. The combination of current sentiment and recent changes gives us a further mixed EURUSD trading bias.

Five Things Traders are Reading

  1. US Dollar Hovers Near Monthly, Yearly High after Q3’18 US GDP Beats” by Christopher Vecchio, CFA , Sr. Currency Strategist
  2. GBPUSD Analysis: Eyeing a Fresh 16-Month Lowby Nick Cawley, Market Analyst
  3. Charts for Next week – EUR/USD, GBP/USD, USD/JPY, USD/CAD, and Moreby Paul Robinson , Market Analyst
  4. EUR/GBP Working on Bearish Price Sequence, Update on USD/ZAR Set-up” by Paul Robinson , Market Analyst
  5. JPY Bulls Dominate vs EUR, GBP and AUD as Safe Haven Flows Pour in” by Justin McQueen, Market Analyst

--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.comFollow Justin on Twitter @JMcQueenFX