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DailyFX Digest: Euro Hoping to Extend Recovery as CPI Ticks Up

DailyFX Digest: Euro Hoping to Extend Recovery as CPI Ticks Up

Research, Research Team


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The US Dollar corrected broadly lower against its major counterparts, snapping a four-day winning streak. Traders overlooked revised second-quarter US GDP data upgrading the growth rate to 3.1 percent, the strongest in over two years. Perhaps the outcome was dismissed as too dated, with markets opting for a round of profit-taking before a fresh directional lead emerges.

The greenback’s weakness predictably bolstered gold prices while crude oil appeared to capitulate having failed to make have of supportive economic data, with the WTI contract suffering its largest loss in three weeks. Equity prices firmed a bit, with the S&P 500 narrowly setting a new record-high daily close.

DailyFX Economic Calendar: Asia Pacific and Europe

The economic calendar is packed through the end of the week but it is unclear how much of the news-flow on the docket may actually inspire a lasting response from FX markets.

Japan CPI statistics are expected to show a slight pickup in inflation but at 0.6 percent on-year, the result may do little to shake loose established BOJ policy expectations. The same may be true for Australian Private Sector Credit and Chinese PMI figures. Traders expect the RBA to remain firmly on hold well into next year, so these reports may mean little for the Australian Dollar.

Eurozone CPI data is perhaps the most potent item on the docket, with the headline price growth rate seen hitting a five-month high at 1.6 percent. That might help inspire a further recovery in the Euro as traders weigh up the probability that the central bank will begin unwinding QE asset purchases next month. A revised set of second-quarter UK GDP figures may pass without incident absent a major deviation from forecasts.

DailyFX Webinar Calendar

IG Client Sentiment Index Chart of the Day: EUR/JPY

Retail trader data shows 39.9% of traders are net-long EUR/JPY, with the ratio of traders short to long at 1.51 to 1. In fact, traders have remained net-short since Aug 04 when EUR/JPY traded near 130.389; price has moved 1.8% higher since then. The number of traders net-long is 0.8% lower than yesterday and 26.5% higher from last week, while the number of traders net-short is 3.0% lower than yesterday and 0.7% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURJPY prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current EURJPY price trend may soon reverse lower despite the fact traders remain net-short.

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  5. US Merchandise-Trade Balance hits 10-Month Low, US Dollar Remains Steady by Dylan Jusino, DailyFX Research

The DailyFX Morning Digest is published every day before the US cash equity open - you can sign up 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 sign up here to receive that report in your inbox every day.

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