Asia AM Digest: Pound Buoyed by Brexit Optimism Yet Again
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The British Pound continued to climb as Brexit-related news flow brightened. This time around, the currency got a lift from reports that the UK and Ireland are nearing agreement on how to approach the border between the latter country and Northern Ireland after the former’s exit from the EU.
The Euro shot higher as well, rising alongside German bonds as yields and the DAX equities benchmark fell. That points to risk aversion, with haven-seeking capital flows directed to the relative safety of cash and government debt, as the catalyst behind the advance.
The Japanese Yen declined as hopes for US tax cut legislation buoyed sentiment in North American trade. A version of the proposal is currently being debated in the US Senate. Indeed, the perennially anti-risk risk currency moved inversely of the baseline S&P 500 stock index.
The New Zealand Dollar was the worst performer in the G10 FX space however. The currency came under heavy selling pressure following disappointing business confidence data and continued to build on those losses throughout the remainder of the day.
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IG Client Sentiment Index Chart of the Day: EUR/USD
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Retail trader data shows 39.0% of traders are net-long EUR/USD, with the ratio of traders short to long at 1.56 to 1. The number of traders net-long is unchanged than yesterday and 21.3% higher from last week, while the number of traders net-short is 1.1% lower than yesterday and 11.4% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EUR/USD 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/USD price trend may soon reverse lower despite the fact traders remain net-short.
Five Things Traders are Reading
- EUR/USD Price Analysis: Bullish Outlook Mired by Slope Resistance by Michael Boutros, Currency Strategist
- U.S. Dollar Price Action Setups by James Stanley, Currency Strategist
- EUR/USD Recovery Takes Shape as ECB Sees ’Notable’ Euro-Area Growth by David Song, Currency Analyst
- AUD/NZD Threatens a Deeper Bearish Move Below 1.1000 by James Stanley, Currency Strategist
- EUR/USD Bulls Respond to CPI-Induced Dip; WTI Tests Bull Flag Resistance by James Stanley, Currency Strategist
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