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Asia AM Digest: NZ Dollar Soars on Jobs Data, China PMI Ahead

Asia AM Digest: NZ Dollar Soars on Jobs Data, China PMI Ahead

Research, Research Team

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The US Dollar returned to the offensive against most of its major counterparts yesterday, rising alongside front-end Treasury bond yields as the rate hike trajectory implied in Fed Funds futures steeped once again. That may have reflected pre-positioning ahead of Wednesday’s FOMC meeting, which is widely expected to set the stage for further tightening in December.

It was the British Pound that outperformed however, surging against the G10 FX spectrum. The bulk of the move played out against a backdrop of surging UK government bond yields, implying that this too might have reflected preparatory maneuvers, in this case ahead of an all-but-certain BOE rate hike later in the week. OIS markets imply that traders put the likelihood of an increase at 87.7 percent.

DailyFX Economic Calendar: Asia Pacific (all times in GMT)

Asia AM Digest: NZ Dollar Soars on Jobs Data, China PMI Ahead

The passing of New Zealand labor-market data early in Asia Pacific trade has left little else of substance on the economic calendar. That release produced results that were far better than analysts expected and sent the Kiwi Dollar sharply higher.

China’s private-sector Caixin manufacturing PMI survey is due, but the release may pass without fireworks absent a major deviation from expectations. Indeed, yesterday’s release of official PMI statistics seemed to pass mostly unnoticed.

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Asia AM Digest: NZ Dollar Soars on Jobs Data, China PMI Ahead

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

Asia AM Digest: NZ Dollar Soars on Jobs Data, China PMI Ahead

CLICK HERE to learn more about the IG Client Sentiment Index

Retail trader data shows 49.0% of traders are net-long USD/JPY, with the ratio of traders short to long at 1.04 to 1. The number of traders net-long is 5.8% higher than yesterday and 5.9% lower from last week, while the number of traders net-short is 8.8% higher than yesterday and 6.3% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USD/JPY 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 USD/JPY -bullish contrarian trading bias.

Five Things Traders are Reading

  1. New Zealand Dollar Rallies as Unemployment Data Beats Expectations by Varun Jaitly, DailyFX Research
  2. USD/CAD Eyes Resistance Ahead of FOMC, US & Canada Employment by Michael Boutros, Currency Strategist
  3. GBP/USD Bid Ahead of BoE as EU Pledges to Advance Brexit Negotiations by David Song, Currency Analyst
  4. Bitcoin Primed for Fresh Record Highs on CME Futures Statement by Nick Cawley, Analyst
  5. US Consumer Sentiment Hits Near 17-Year High by Dylan Jusino, DaliyFX Research

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

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