Asia AM Digest: Commodity Currencies Rise Alongside Stocks
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The sentiment-linked Australian, Canadian and New Zealand Dollars traded higher as risk appetite firmed yesterday, tracking S&P 500 futures upward. The benchmark US stock index issued its strongest close on record. All major global indexes save for Spain’s IBEX 35 posted gains. The US Dollar edged broadly lower but remained firmly contained within recent trading ranges.
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IG Client Sentiment Index Chart of the Day: EUR/JPY
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Retail trader data shows 37.6% of traders are net-long EUR/JPY, with the ratio of traders short to long at 1.66 to 1. In fact, traders have remained net-short since Aug 04 when EUR/JPY traded near 129.226; price has moved 2.2% higher since then. The number of traders net-long is 3.1% higher than yesterday and 21.4% lower from last week, while the number of traders net-short is 4.5% lower than yesterday and 28.2% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EUR/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 EUR/JPY price trend may soon reverse lower despite the fact traders remain net-short.
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.