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DailyFX Morning Digest: Risk Appetite Subsides as Geopolitical Tensions Heat Up

DailyFX Morning Digest: Risk Appetite Subsides as Geopolitical Tensions Heat Up

Research, Research Team


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Risk appetite has been quelled following more provocations from North Korea, this time threatening a nuclear weapons test in the Pacific Ocean. As has been the case for the past few months, such saber-rattling has provided a short-term boost for Gold and the Japanese Yen, while investors have turned to the safety of US Treasuries. Accordingly, with US yields dropping on safety demand, the US Dollar is trading slightly lower for the second consecutive day ahead of the US cash equity open. The Canadian Dollar is off slightly following this morning’s inflation data.

DailyFX Economic Calendar: Friday, September 22, 2017 - North American Data Releases

While there a few notable events for both Canada and the United States today, perhaps the most important event isn’t emanating from North America, but rather from Europe: UK Prime Minister Theresa May will be delivering a speech on Brexit in Florence, Italy today at 9:15 EDT/13:15 GMT.

Ahead of time, it is rumored that she will request a transition period for Brexit, a sign that the initial two-year negotiating window may not be long enough to achieve a ‘soft’ landing for the UK. Anything that points to a reduced likelihood of a ‘hard Brexit’ should be seen in a positive light for the British Pound. Needless to say, heightened volatility can be expected in the GBP-crosses before the day’s over.

DailyFX Webinar Calendar: Monday, September 25, 2017

IG Client Sentiment Index Chart of the Day: EURUSD

Learn more about the IG Client Sentiment Index on the DailyFX Sentiment page

EURUSD: Retail trader data shows 29.3% of traders are net-long with the ratio of traders short to long at 2.41 to 1. In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.08475; price has moved 10.3% higher since then. The percentage of traders net-long is now its lowest since Sep 12 when EURUSD traded near 1.19714. The number of traders net-long is 18.6% lower than yesterday and 21.0% lower from last week, while the number of traders net-short is 11.0% higher than yesterday and 13.3% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EURUSD-bullish contrarian trading bias.

Five Things Traders are Reading

  1. “EUR/USD, CAD, Cable in the Spotlight Ahead of Heavy Outlay of Drivers” by James Stanley, Currency Strategist
  2. “Trading Outlook: US Dollar, Euro, Gold Price, DAX & More” by Paul Robinson, Market Analyst
  3. “USD Eases as Rate Expectations Steady; GBP Awaits May Speech” by Christopher Vecchio, CFA, Senior Currency Strategist
  4. “Silver Breaks Support, Gold Testing Prior Double-top” by Paul Robinson, Market Analyst
  5. “GBP Coiled Ahead of Make-or-Break Brexit Speech” by Nick Cawley, Analyst

The DailyFX Morning Digest is published every day before the US cash equity open - you can signup here to receive this report in your inbox every day. The DailyFX Evening Digest is published every day before the Tokyo cash equity open - you can signup here to receive that report in your inbox every day. If you're interested in receiving both reports each day, you can signup here.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.