Asia AM Digest: British Pound Hurt, Yen Down on Wall Street Break
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The British Pound ended up being the worst performing major currency on Friday as EU’s chief negotiator Michel Barnier warned that a “Brexit transition is not a given if disagreements persist”. Sterling ended up giving up its gains that it scored on Thursday’s hawkish Bank of England “Super Thursday” event.
Meanwhile, the sentiment-sensitive Canadian Dollar brushed off the first net decline in employment since July 2016. Most of the losses were from the part-time sector, full-time positions actually rose by 49k. It looked like its attention though was on external factors.
A more rosy day on Wall Street helped push other sentiment-sensitive currencies such as the Australian and New Zealand Dollars higher. The S&P 500 and Dow Jones closed up 1.49% and 1.38% respectfully, taking a breather after earlier week’s heavy selloff. Perennially anti-risk ones like the Japanese Yen and Swiss Franc suffered.
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IG Client Sentiment Index Chart of the Day: USD/JPY
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Retail trader data shows 71.2% of USD/JPY traders are net-long with the ratio of traders long to short at 2.48 to 1. In fact, traders have remained net-long since Dec 29 when USD/JPY traded near 113.317; price has moved 4.3% lower since then. The number of traders net-long is 6.3% lower than yesterday and 7.2% lower from last week, while the number of traders net-short is 17.1% lower than yesterday and 12.2% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USD/JPY prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger USD/JPY-bearish contrarian trading bias.
Five Things Traders are Reading:
- Weekly Trading Forecast: Markets Brace for US Inflation Data by DailyFX Research Team
- EUR/USD Weekly Technical Outlook: Euro Looking for Buyers at Support by Paul Robinson, Market Analyst
- Canada Change in Employment Falls for First Time Since July 2016 by DailyFX Research Team
- US Dollar Index (DXY) Forecast: Could The Stage Be Set For a Rally? by Tyler Yell, CMT, Forex Trading Instructor
- Australian Dollar Should Remain Heavy On Global Risk Aversion by David Cottle, Analyst
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