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The US Dollar is slipping back for a second consecutive day and is now on place for its lowest close of 2018, unless the Federal Reserve has something to say about it later on today. The first policy meeting of 2018 for the FOMC will also be the last chaired by Janet Yellen, as new Jerome Powell (as well as a new slate of voters) rotates onto the committee next week. Ahead of the policy announcement, rates markets aren’t pricing in any change today; but Fed funds futures are pricing in 25-bps hikes in March, June, and December. Elsewhere, with the preliminary January Euro-Zone CPI beating expectations at +1.3% versus +1.2% expected, the Euro was able to extend its rally; EUR/USD is on track for its highest close of 2018.
DailyFX Economic Calendar: Wednesday, January 31, 2018 – North American Releases
Wednesday is perhaps the most consequential day of the week for the North American calendar in sum, given the plethora of both American and Canadian data releases due out (while US NFP are on Friday, there are no ‘high’ rated Canadian data due). Already today we’ve seen the release of the January US ADP Employment Change report, showing jobs gains of +234K versus +185K – a strong precursor to Friday’s official jobs report. Elsewhere, the November Canadian GDP report showed that the economy grew by +3.5% versus +3.4% expected (y/y). Later today, the Federal Reserve’s first policy decision of 2018 may prove to be its most uneventful of the year.
DailyFX Webinar Calendar: Wednesday, January 31, 2018
IG Client Sentiment Index Chart of the Day: USDJPY
Learn more about the IG Client Sentiment Index on the DailyFX Sentiment page
USDJPY: Retail trader data shows 72.8% of traders are net-long with the ratio of traders long to short at 2.68 to 1. In fact, traders have remained net-long since Dec 29 when USDJPY traded near 113.267; price has moved 3.9% lower since then. The number of traders net-long is 1.6% lower than yesterday and 21.2% higher from last week, while the number of traders net-short is 4.8% higher than yesterday and 18.0% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USDJPY prices may continue to fall. Positioning is less net-long than yesterday but more net-long from last week. The combination of current sentiment and recent changes gives us a further mixed USDJPY trading bias.
Five Things Traders are Reading
- “Traders Urged to Respond to Proposed European Rule Changes” by Martin Essex, MSTA, Analyst and Editor, and Luigi Guida, Market Analyst
- “USD Bearish Momentum Set to Continue Through January FOMC” by Christopher Vecchio, CFA, Senior Currency Strategist
- “Trading Outlook for USD-pairs, Cross-rates Ahead of FOMC” by Paul Robinson, Market Analyst
- “Euro Continues to Defy Gravity After Mixed Data Bag” by Martin Essex, MSTA, Analyst and Editor
- “Gold Prices Rise After SOTU Speech But Hawkish Fed May Cap Gains” by Ilya Spivak, Senior Currency Strategist
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