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Asia AM Digest: Euro Soars on ECB Minutes, US Dollar Drops Again

Asia AM Digest: Euro Soars on ECB Minutes, US Dollar Drops Again

Research, Research Team


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The Euro traded higher after the minutes from December’s ECB policy meeting hinted that the central bank might alter forward guidance on its QE program before September. That stoked speculation that stimulus may be dialed back earlier than previously expected.

The sentiment-linked Australian and New Zealand Dollars traded higher as risk appetite improved, with the currencies marching upward alongside futures tracking the benchmark S&P 500 stock index. The US Dollar plunged as soft PPI data bolstered speculation that soft inflation will keep Fed rate hikes modest in 2018.

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

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Retail trader data shows 37.9% of traders are net-long EUR/USD, with the ratio of traders short to long at 1.64 to 1. The number of traders net-long is 2.6% lower than yesterday and 38.2% higher from last week, while the number of traders net-short is 8.4% lower than yesterday and 21.4% 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

  1. EUR/USD Elliott Wave Analysis: 3 Year Chart Pattern Nears an End by Jeremy Wagner, CEWA-M
  2. Central Bank Weekly: USD Ignores Rising Odds; CAD Eyes Hike Next Week by Christopher Vecchio, CFA, Sr. Currency Strategist
  3. U.S. Dollar Price Action Setups Ahead of CPI, Retail Sales by James Stanley, Currency Strategist
  4. Crude Oil Price Breakout Testing Initial Resistance Targets by Michael Boutros, Currency Strategist
  5. Becoming a Better Trader: 6 Things to Know Before Entering a Trade by Paul Robinson, Market Analyst

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