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Asia AM Digest: Euro Gains as Key ECB Meeting Draws Closer

Asia AM Digest: Euro Gains as Key ECB Meeting Draws Closer

Research, Research Team

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European currencies led the way higher yesterday. The Euro rose ahead of an upcoming ECB monetary policy announcement expected to bring tapering of the central bank’s QE asset purchases. The British Pound proved strongest on the day however after upbeat UK GDP data bolstered BOE rate hike expectations.

Meanwhile, commodity bloc FX continued to suffer. The Australian Dollar fell after disappointing CPI data undermined already timid RBA rate hike prospects while political uncertainty continued to weigh on its Kiwi cousin. The Canadian Dollar fell after the BOC signaled it is in no hurry to raise rates again.

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

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Retail trader data shows 52.9% of traders are net-long GBP/JPY, with the ratio of traders long to short at 1.12 to 1. The number of traders net-long is 10.9% lower than yesterday and 3.3% higher from last week, while the number of traders net-short is 1.7% higher than yesterday and 16.0% higher from last week.

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

Five Things Traders are Reading

  1. New Zealand Dollar Recovers from Mostly Sour Trade Data by Daniel Dubrovsky
  2. Bank of Canada Keeps Rates on Hold, Canadian Dollar Falls Sharply by Dylan Jusino
  3. GBP After UK GDP; EUR Ahead of ECB Tomorrow by Christopher Vecchio, CFA, Sr. Currency Strategist
  4. EUR/JPY Technical Analysis: One-Year Highs Hit Fib Resistance pre-ECB by James Stanley, Currency Strategist
  5. Ethereum Prices Settle on Fibonacci Support by Michael Boutros, Currency Strategist

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