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US AM Digest: US Dollar Bearish Reversal Finds Follow Through

US AM Digest: US Dollar Bearish Reversal Finds Follow Through

Research, Research Team

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Global markets continue to reel from comments made by US President Trump over the past 24-hours regarding trade wars and the prospects of more tariffs. Historically speaking, unilaterally imposed tariffs have had damaging results for the United States, as Senior Currency Strategist Christopher Vecchio, CFA, outlined this morning. The US Dollar has been hit across the board, with a bearish daily key reversal forming yesterday, throwing into question the recent bottoming effort. Elsewhere, Euro traders remain nervous as the Italian elections are due this coming Sunday as well as the ECB’s March meeting next week. Similarly, the British Pound remains on rocky ground following UK Prime Minister May’s comments regarding Brexit. Lastly, the Japanese Yen continues to outperform as the BOJ signaled that it could winddown its easing program around the start of fiscal year 2019 – next April.

DailyFX Economic Calendar: Friday, March 2, 2018 – North American Releases

The week ends on a quieter note after a barrage of US economic data over the past few days. Q4’17 and December Canadian GDP figures were disappointing, but left little impact as tensions over NAFTA and US trade wars have taken control of sentiment. Later today, the final February UofM Sentiment figures are due and should stay elevated near their all-time highs.

DailyFX Webinar Calendar: Monday, March 5, 2018

IG Client Sentiment Index Chart of the Day: USDJPY

USDJPY: Retail trader data shows 71.0% of traders are net-long with the ratio of traders long to short at 2.45 to 1. In fact, traders have remained net-long since Dec 29 when USDJPY traded near 112.573; price has moved 6.4% lower since then. The number of traders net-long is 7.3% lower than yesterday and 0.2% lower from last week, while the number of traders net-short is 11.2% lower than yesterday and 34.1% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USDJPY 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 USDJPY-bearish contrarian trading bias.

Learn more about the IG Client Sentiment Index on the DailyFX Sentiment page

Five Things Traders are Reading

  1. “The Impact of Tariffs and Trade Wars on the US Economy and the Dollar” by Christopher Vecchio, CFA, Senior Currency Strategist
  2. “Bearish Canadian GDP Print Fails to Push Loonie In Either Direction” by Dylan Jusino, DailyFX Research
  3. “Trading Outlook for Next Week: EUR/USD, NZD/USD, Yen, Crosses & More” by Paul Robinson, Market Analyst
  4. “EUR Traders Beware - Italian Political Risk is Real” by Nick Cawley, Analyst
  5. “Ethereum Chart Set to Roll Over, Ripple on the Verge of a Breakdown” by Paul Robinson, Market Analyst

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