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Asia AM Digest: US Dollar Under Fire as Jobs Data Looms Ahead

Asia AM Digest: US Dollar Under Fire as Jobs Data Looms Ahead

Research, Research Team

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The US Dollar was back on the defensive Thursday, shrugging off an upbeat manufacturing ISM survey. The move might have reflected precautionary repositioning ahead of Friday’s deluge of US economic data releases, including January’s labor-market report as well as durable goods orders, factory orders and consumer confidence statistics.

The Euro surged amid rumors that a group of ECB policymakers is pushing President Mario Draghi to give definitive guidance on when rates might rise. The reports’ sources opted for anonymity, but that did not seem to deter the markets’ enthusiasm for its potentially hawkish implications. The officials in question were apparently only calling for transparency and not necessarily for sooner tightening however.

The Japanese Yen fell as Asia Pacific stocks recovered, weighing on the perennially anti-risk currency. The Australian Dollar likewise declined, weighed down by another round of worrying domestic data. Disappointing CPI data earlier in the week was following by a slump in building permits and a third consecutive monthly drop in the price for Australian exports on global markets.

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

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Retail trader data shows 39.0% of traders are net-long AUD/JPY, with the ratio of traders short to long at 1.56 to 1. In fact, traders have remained net-short since Jan 16 when AUD/JPY traded near 88.05; price has moved 0.1% lower since then. The percentage of traders net-long is now at its highest since Jan 24 when AUD/JPY traded near 87.997. The number of traders net-long is 17.4% higher than yesterday and 5.8% higher from last week, while the number of traders net-short is 24.8% lower than yesterday and 39.0% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests AUD/JPY 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 AUDJPY price trend may soon reverse lower despite the fact traders remain net-short.

Five Things Traders are Reading:

  1. AUD/USD Rally Unravels Ahead of Reserve Bank of Australia (RBA) Meeting by David Song, Currency Analyst
  2. USD/CAD Opens February at Support- Rallies to Be Sold by Michael Boutros, Currency Strategist
  3. NFP Price Action Setups Around the U.S. Dollar by James Stanley, Currency Strategist
  4. Becoming a Better Trader – Q&A for Performance Improvement by Paul Robinson, Market Analyst
  5. Will Ethereum (ETH) Knock Bitcoin (BTC) Off its Top Spot? by Nick Cawley, Analyst

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