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Asia AM Digest: Euro Plunges as Italian Election Looms on the Horizon

Asia AM Digest: Euro Plunges as Italian Election Looms on the Horizon

Research, Research Team


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The Euro traded broadly lower yesterday, in a move that the newswires attributed to anxiety ahead of the March 4 general election in Italy. DailyFX Sr. Currency Strategist Ilya Spivak has argued that the single currency may top the list of major trend reversals in 2018 following stellar performance last year.

The New Zealand Dollar rose, supported by a pickup in local bond yields that may reflect a hawkish shift in RBNZ policy bets. The Australian Dollar fell however, in a move that might have been corrective of recent gains after CFTC data put speculative futures positioning at its most net-short in 11 months.

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IG Client Sentiment Index Chart of the Day: AUD/USD

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Retail trader data shows 37.5% of traders are net-long AUD/USD, with the ratio of traders short to long at 1.66 to 1. In fact, traders have remained net-short since Dec 19 when AUD/USD traded near 0.76457; price has moved 2.8% higher since then. The number of traders net-long is 9.8% lower than yesterday and 6.0% lower from last week, while the number of traders net-short is 5.9% lower than yesterday and 2.8% 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

  1. A Weekly Technical Perspective on DXY, GBP/USD, AUD/USD by Michael Boutros, Currency Strategist
  2. GBP/USD Technical Analysis: Strong 2017 Close Keeps Door Open for Sterling Strength by James Stanley, Currency Strategist
  3. UK Markets Alert for ECB Minutes, Fed Speakers by Nick Cawley, Analyst
  4. Weekly Technical Outlook- USD Crosses Grind into 2018 Open by Michael Boutros, Currency Strategist
  5. EUR/USD Technical Analysis: Large Double Top Taking Shape? by Ilya Spivak, Sr. Currency Strategist

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