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Asia AM Digest: British Pound Gains on Brexit Breakthrough Hopes

Asia AM Digest: British Pound Gains on Brexit Breakthrough Hopes

Research, Research Team


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

The Euro succumbed to broad-based selling pressure after German coalition negotiations broke down, opening the door for the possibility of a repeat election. The British Pound pushed higher amid reports that the UK might be willing to improve its offer on the EU “divorce bill” payout, hinting that Brexit talks may begin to move forward again having stalled recently.

Most other G10 FX currencies were in correction mode. The US Dollar turned higher as prices retraced losses after Friday’s close marked two consecutive weeks on the defensive. Meanwhile, the Japanese Yen retreated while the sentiment-linked Australian and New Zealand Dollars reclaimed some lost ground as markets digested moves made amid risk aversion following the revelation that Special Counsel Robert Mueller has subpoenaed the Trump campaign.

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

DailyFX Webinar Calendar21 October 2017

AUD/USD Trading Prep for the Week Ahead (03:00 GMT) with Ilya Spivak

Asia Pacific Market Drivers (09:00 GMT) with David Cottle

Indices & Commodities Analysis for the Active Trader (10:00 GMT) with Paul Robinson

Trading Price Action (18:00 GMT) with James Stanley

Trading Q&A (21:00 GMT) with John Kicklighter

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

CLICK HERE to learn more about the IG Client Sentiment Index

Retail trader data shows 49.0% of traders are net-long GBP/JPY, with the ratio of traders short to long at 1.04 to 1. In fact, traders have remained net-short since Nov 07 when GBP/JPY traded near 149.806; price has moved 0.6% lower since then. The number of traders net-long is 0.4% lower than yesterday and 17.1% lower from last week, while the number of traders net-short is 9.2% lower than yesterday and 25.9% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBP/JPY prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current GBP/JPY price trend may soon reverse lower despite the fact traders remain net-short.

Five Things Traders are Reading

  1. USD/CAD Hugs Trend Line, But For How Much Longer? by Jeremy Wagner, CEWA-M
  2. Gold Prices Fall Back to Confluent Support, Threatening to Break Impasse by James Stanley, Currency Strategist
  3. GBP/USD Marches Toward Monthly-High (1.3321) Ahead of BoE Testimony by David Song, Currency Analyst
  4. Gold Prices Sport a Bearish Pattern; EUR/USD May Dip to 1.1650 by Jeremy Wagner, CEWA-M
  5. Bitcoin Rallies Through $8,200; New Crypto Market Cap Record by Nick Cawley, Analyst

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