Asia AM Digest: US Dollar Rebounds on ISM Data, FOMC Minutes

2018-01-04 00:00:00 Research, Research Team

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The US Dollar corrected higher against its major counterparts. The bulk of the move followed the release of a better than expected manufacturing ISM survey and a cautiously upbeat set of minutes from December’s FOMC meeting. That helped drive front-end bond Treasury bond yields higher while the priced-in 2018 rate hike path implied in Fed Funds futures steepened.

The British Pound continued to oscillate in familiar territory, reversing yesterday’s corrective bounce to settle back near the bottom of the range prevailing on the eve of the calendar turn to 2018. The Swiss Franc and the Euro likewise fell despite supportive economic data (Swiss PMI, German unemployment). A singular reason for broad European FX weakness was not readily apparent.

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IG Client Sentiment Index Chart of the Day: Gold

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Retail trader data shows 66.2% of traders are net-long gold, with the ratio of traders long to short at 1.96 to 1. The percentage of traders net-long is now its lowest since Aug 31 when it traded near 1320.53. The number of traders net-long is 3.9% lower than yesterday and 14.7% lower from last week, while the number of traders net-short is 15.9% higher than yesterday and 35.2% higher from last week.

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

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