Asia AM Digest: Euro Soars as US and NZ Dollars Plunge

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The Euro roared higher following impressively strong German GDP data. The Eurozone’s largest economy added 0.8 percent in the third quarter, topping estimates calling for a 0.6 percent gain. The British Pound and the Swiss Franc followed the single currency upward, with the former taking a brief detour downward after UK CPI statistics underwhelmed.

The Yen traded mostly higher as risk appetite soured, with the benchmark S&P 500 stock index tracking lower as the perennially anti-risk Japanese currency advanced. The US Dollar faced selling pressure as Treasury bond yields declined, undermining the greenback’s yield appeal. The New Zealand Dollar was the weakest on the day however, extending seemingly politically driven overnight losses.

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

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

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Retail trader data shows 53.9% of traders are net-long GBP/USD, with the ratio of traders long to short at 1.17 to 1. In fact, traders have remained net-long since Nov 01 when GBP/USD traded near 1.32549; price has moved 1.0% lower since then. The number of traders net-long is 8.9% lower than yesterday and 0.1% lower from last week, while the number of traders net-short is 15.0% higher than yesterday and unchanged from last week.

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

Five Things Traders are Reading

1. USD/JPY Rebound Unravels Amid Cautious Fed Rhetoric by David Song, Currency Analyst
2. AUD/USD Technical Forecast: Searching for a Bottom by Jaremy Wagner, CEWA-M
3. Trading the U.S. Dollar Pullback - Price Action Setups by James Stanley, Currency Strategist
4. U.S. Dollar Sell-off Targets Initial Support by Michael Boutros, Currency Strategist
5. EUR/GBP Rallies but Resistance Levels will Cap Move by Nick Cawley, Analyst

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