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Asia AM Digest: British Pound Hurt, Yen Down on Wall Street Break

Asia AM Digest: British Pound Hurt, Yen Down on Wall Street Break

Research, Research Team

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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:

  1. Weekly Trading Forecast: Markets Brace for US Inflation Data by DailyFX Research Team
  2. EUR/USD Weekly Technical Outlook: Euro Looking for Buyers at Support by Paul Robinson, Market Analyst
  3. Canada Change in Employment Falls for First Time Since July 2016 by DailyFX Research Team
  4. US Dollar Index (DXY) Forecast: Could The Stage Be Set For a Rally? by Tyler Yell, CMT, Forex Trading Instructor
  5. Australian Dollar Should Remain Heavy On Global Risk Aversion by David Cottle, Analyst

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