Asia AM Digest: Fed Chair Post in Focus as Powell's Chances Grow
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The Euro continued to suffer as the dovish tone of the ECB monetary policy announcement continued to reverberate. The British Pound likewise traded lower, weighed down by Brexit-related jitters. Rates-sensitive currencies at both ends of the G10 yield spectrum – the Yen at the low end and commodity bloc FX at the opposite extreme – traded higher amid news that Jerome Powell may be named as the next Fed Chair.
US President Trump is reportedly down to a short list of three candidates to lead the central bank: incumbent Chair Janet Yellen, Stanford professor John Taylor and Governor Powell. Naming the latter may have been read as a relatively dovish way to install a fellow Republican at the helm compared with Mr Taylor, whose appointment might have signaled an aggressively hawkish shift in tone.
DailyFX Economic Calendar: Asia Pacific (all times in GMT)
A barebones offering on the economic calendar leaves financial markets without an obvious catalyst in Asia Pacific trade. That may allow space for regional traders to take their turn pricing in Friday’s late-day news flow, with the apparently brightening prospects of a Powell-led Fed come February likely to take center stage. Needless to say, this points to continued volatility in rates-driven FX as well as the US Dollar.
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IG Client Sentiment Index Chart of the Day: GBP/JPY
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Retail trader data shows 54.7% of traders are net-long GBP/JPY, with the ratio of traders long to short at 1.21 to 1. The number of traders net-long is 16.4% lower than yesterday and 0.9% higher from last week, while the number of traders net-short is 13.7% higher than yesterday and 10.9% 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
- Weekly Forecast: A Crowded Field with Fed, BoE, BoJ and NFPs Ahead by DailyFX Research
- The Dollar’s Reversal Attempt Hinges on Fed Policy and Speculation Next Week by John Kicklighter, Chief Strategist
- EUR/JPY Plummets into Monthly Lows by Michael Boutros, Currency Strategist
- JPY Set To Challenge King Dollar Status In G8, Dollar Likely To Win Outby Tyler Yell, CMT
- EUR/USD Weekly Technical Analysis: More Euro Selling Aheadby Paul Robinson, Market Analyst
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.