Asia AM Digest: Yen Up, Stocks Retreat, Pound Down on Brexit News
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The anti-risk Japanese Yen was the best performing major on Wednesday as stocks in Asia, Europe and the US retreated. These exchanges had a chance to react to the rather hawkish commentary from Jerome Powell who swelled Fed rate hike expectations. The US Dollar rose.
Meanwhile, the British Pound suffered as UK’s Prime Minister Theresa May rejected a proposed Brexit draft from the European Union. The document contained details about the withdrawal of the UK. In particular, a plan for a hard border that will be created between Britain and Northern Ireland. Mrs. May argued that such an outcome will “undermine the UK common market”.
Earlier in the day, the Canadian Dollar declined as gasoline inventories increased more than expected. The increase in supply here also negatively affected crude oil prices which fell to about a 1-week low.
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IG Client Sentiment Index Chart of the Day: USD/JPY
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Retail trader data shows 68.2% of USD/JPY traders are net-long with the ratio of traders long to short at 2.14 to 1. In fact, traders have remained net-long since Dec 29 when USD/JPY traded near 112.573; price has moved 5.2% lower since then. The number of traders net-long is 0.1% lower than yesterday and 1.0% lower from last week, while the number of traders net-short is 12.6% higher than yesterday and 3.9% higher 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. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current USD/JPY price trend may soon reverse higher despite the fact traders remain net-long.
Five Things Traders are Reading:
- S&P 500 Ends a 10-Month Climb in February, GBP/USD Breaks and EUR/USD Readies by John Kicklighter, Chief Currency Strategist
- Key Fundamental Factors for FX: A Primer for Forex Traders in 2018 by Tyler Yell, CMT, Forex Trading Instructor
- Ichimoku Charts That Matter: USD Tests Cloud, Gold on High Alert by Tyler Yell, CMT, Forex Trading Instructor
- Ripple Price Analysis: XRP/USD Consolidates Above Key Support by Michael Boutros, Currency Strategist
- EU Brexit Draft Rejected by UK’s Theresa May, Pound Faltersby the DailyFX Research Team
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