Asia AM Digest: Will Wall Street Calm Continue into Asia?
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A positive first day of the week on Wall Street and a rebound in copper futures helped push the Australian Dollar higher. The S&P 500 gapped to the upside, rising 1.39% to score a second consecutive day on the upside following last week’s panic selloff. Calmness seemed to settle in the markets as the VIX volatility index fell 11% to 25.61.
Meanwhile, the anti-risk Swiss Franc underperformed against its major counterparts. The US Dollar also took a hit as US government bond yields fell.
US President Donald Trump announced a $4.4 trillion budget proposal for fiscal year 2019 that is projected to increase the deficit by $1.19 trillion. The spending plan assumes GDP rising 3.1% y/y in the fourth quarter.
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IG Client Sentiment Index Chart of the Day: AUD/USD
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Retail trader data shows 44.1% of AUD/USD traders are net-long with the ratio of traders short to long at 1.27 to 1. In fact, traders have remained net-short since Dec 19 when AUD/USD traded near 0.75061; price has moved 4.3% higher since then. The number of traders net-long is 24.6% higher than yesterday and 42.3% higher from last week, while the number of traders net-short is 2.7% higher than yesterday and 21.7% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests AUD/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 AUD/USD price trend may soon reverse lower despite the fact traders remain net-short.
Five Things Traders are Reading:
- EUR/GBP Technical Analysis: Chart Setup Favors Euro Gains by Ilya Spivak, Senior Currency Strtaegist
- Elliott Wave Webinar: USD Index May See One More Dip by Jeremy Wagner, CEWA-M, Head Forex Trading Instructor
- Euro May Trend Lower Despite Sentiment by DailyFX Research Team
- Oil Prices Snap Bearish Sequence, OPEC Sees Rebalanced Energy Market by David Song, Currency Analyst
- EUR/USD, GBP/USD: Deeper Retracement Potential as DXY Holds 90.00 by James Stanley, Currency Strategist
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