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The US Dollar was up broadly against its major counterparts on Thursday, rising alongside local front-end government bond yields. This might have been a pre-positioning move for next week’s Fed monetary policy announcement. There, a rate hike is unanimously priced in but more interesting will be policymakers’ forward guidance.
US stocks swung throughout the session, ending the day little changed. Declines were amplified though when Special Counsel Robert Mueller subpoenaed the Trump Organization for documents. The anti-risk Japanese Yen gained while higher-yielding currencies such as the New Zealand and Australian Dollars suffered.
Earlier in the day, the British Pound fell hard when UK Brexit Secretary David Davis said that “no deal is better than a bad deal if UK is punished”. However, declines in sentiment-sensitive currencies later in the day overshadowed Sterling’s performance and it finished higher against them.
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IG Client Sentiment Index Chart of the Day: NZD/USD
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Retail trader data shows 35.5% of traders are net-long with the ratio of traders short to long at 1.82 to 1. In fact, traders have remained net-short since Jan 05 when NZD/USD traded near 0.70246; price has moved 3.6% higher since then. The number of traders net-long is 14.8% lower than yesterday and 32.4% lower from last week, while the number of traders net-short is 1.2% higher than yesterday and 11.3% higher from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests NZD/USD prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger NZD/USD-bullish contrarian trading bias.
Five Things Traders are Reading:
- Central Bank Weekly: Looking Ahead to Next Week’s FOMC Meeting by Christopher Vecchio, Sr. Currency Strategist
- Crypto Technical Outlook: Bitcoin, Ether, Ripple at Critical Levels by Michael Boutros, Currency Strategist
- Ichimoku Charts That Matter: CAD Weakness Accelerates, USD in Limbo by Tyler Yell, CMT, Forex Trading Instructor
- EUR/USD Technical Outlook: Price Sell-off to Offer Opportunity by Michael Boutros, Currency Strategist
- USD/JPY Rate Rebound Unravels Even as BoJ Sticks to Dovish Script by David Song, Currency Analyst
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