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Asia AM Digest: Aussie Dollar May See Volatility on Chinese Data

Asia AM Digest: Aussie Dollar May See Volatility on Chinese Data

Research, Research Team

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The British Pound suffered outsized losses amid reports that as many as 40 Tory MPs are mounting a challenge to Prime Minister Theresa May. The US Dollar traded higher as front-end Treasury bond yields turned higher, hinting at a hawkish shift in Fed policy expectations.

Rates-sensitive currencies at both ends of the G10 FX yield spectrum – the Yen at the lower extreme and the commodity bloc currencies at the upper one – traded understandably lower. Politics were a further headwind for the New Zealand Dollar as the ruling Labour party clashed with the previously friendly Greens over ratifying the TPP trade agreement.

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

Asia AM Digest: Aussie Dollar May See Volatility on Chinese Data

Chinese retail sales and industrial production statistics headline the calendar in Asia Pacific trading hours. Data releases out of the world’s second-largest economy have increasingly disappointed relative to consensus forecasts over recent months, opening the door for further downside surprises. That might translate into volatility for the Australian Dollar, which frequently acts as the FX markets’ favored vehicle for expressing a view on Chinese economic developments.

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Asia AM Digest: Aussie Dollar May See Volatility on Chinese Data

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

Asia AM Digest: Aussie Dollar May See Volatility on Chinese Data

CLICK HERE to learn more about the IG Client Sentiment Index

Retail trader data shows 63.0% of traders are net-long NZD/USD, with the ratio of traders long to short at 1.7 to 1. In fact, traders have remained net-long since Oct 18 when NZD/USD traded near 0.71707; price has moved 3.8% lower since then. The number of traders net-long is 1.5% lower than yesterday and 2.5% lower from last week, while the number of traders net-short is 18.9% higher than yesterday and 8.4% higher from last week.

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

Five Things Traders are Reading

  1. New Zealand Dollar To Struggle If RBNZ Monetary Mandate Expands by David Cottle, Analyst
  2. A Dive into the Elliott Wave pattern for EUR/USD by Jaremy Wagner, CEWA-M
  3. U.S. Dollar Digs to Deeper Support, EUR/USD Tags Resistance by James Stanley, Currency Strategist
  4. Dovish ECB to Tame EUR/USD Rebound; NOV Opening Range Remains in Focus by David Song, Currency Analyst
  5. Sterling Suffers as UK PM May Comes Under Renewed Attack by Nick Cawley, Analyst

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