Asia AM Digest: ECB Sinks Euro, Yen Gains as Stocks Flounder
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The Euro plunged after the ECB said now isn’t the time to ponder weaning the economy off stimulus and projected inflation below its target through 2020. The British Pound was little-changed after a broadly status-quo BOE policy announcement. The Swiss Franc fell after the SNB reiterated its commitment to an ultra-loose policy setting despite recent progress on inflation.
The New Zealand Dollar corrected broadly lower having outperformed in the prior day. The Australian Dollar charged higher, buoyed by impressive local employment data. The perennially anti-risk Japanese Yen gained ground as sentiment soured across financial markets, with the move higher corresponding to a drop across all of the world’s top stock benchmarks.
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IG Client Sentiment Index Chart of the Day: EUR/USD
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Retail trader data shows 49.3% of traders are net-long AUD/USD, with the ratio of traders short to long at 1.03 to 1. The percentage of traders net-long is now its lowest since Nov 05 when AUD/USD traded near 0.76493. The number of traders net-long is 15.2% lower than yesterday and 25.5% lower from last week, while the number of traders net-short is 14.4% higher than yesterday and 28.3% higher from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests AUD/USD prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger AUD/USD-bullish contrarian trading bias.
Five Things Traders are Reading
- US-Focused Japanese Yen Market Looks Past Quite Solid Tankan by David Cottle, Analyst
- Post FOMC, ECB, BoE Price Action Setups by James Stanley, Currency Strategist
- AUD/USD Bullish Reversal Eyes Initial Resistance Targets by Michael Boutros, Currency Strategist
- EUR/USD Rebound Unravels as ECB Buys Time; November-Low on the Radar by David Song, Currency Analyst
- Becoming a Better Trader – Q&A for Improved Performance by Paul Robinson, Market Analyst
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