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Asia AM Digest: Aussie Dollar, Sentiment at Risk on China Data

Asia AM Digest: Aussie Dollar, Sentiment at Risk on China Data

Research, Research Team

Get the Asia AM Digest every day before Tokyo equity markets opensign up here !

The US Dollar marched higher as the priced-in 2018 Fed rate hike path implied in futures markets steeped anew following Monday’s setback. Tellingly, the policy-sensitive Australian and New Zealand Dollars suffered outsized losses having led the way higher against its US cousin in the preceding 24 hours. Meanwhile, the Canadian Dollar likewise fell while a rally in crude oil prices faltered. Taken in aggregate, the day’s moves seem to reflect the unwinding of the reaction to Saudi-inspired geopolitical jitters.

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

October’s Chinese trade figures headline the economic calendar in Asia Pacific hours. Although a specific time of release is unknown, recent releases have come in the 2:00-4:00 GMT window, and usually after 3:00. Deterioration in Chinese data outcomes relative to expectation since mid-year opens the door for another downside surprise. That may bode ill for overall sentiment as well as the Australian Dollar, which the markets often use as a liquid proxy for trading developments in the world’s second-largest economy.

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

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Retail trader data shows 53.1% of traders are net-long AUD/USD, with the ratio of traders long to short at 1.13 to 1. The number of traders net-long is 1.4% lower than yesterday and 3.4% lower from last week, while the number of traders net-short is 0.6% higher than yesterday and 0.2% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests AUD/USD 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 AUD/USD price trend may soon reverse higher despite the fact traders remain net-long.

Five Things Traders are Reading

  1. FX Market Scenarios for USD Strength Continuation by James Stanley, Currency Strategist
  2. Near-term Setups in AUD/USD, USD/JPY and Crude by Michael Boutros, Currency Strategist
  3. Crude Oil Prices Flash Overbought Signal for First Time in 2017 by David Song, Currency Analyst
  4. Short Term EUR/USD Pattern Hints at Bounce to 1.17 by Jeremy Wagner, CEWA-M
  5. Bitcoin Shake-Out After New High; Segwit2x Nears by Nick Cawley, Analyst

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