US AM Digest: GBPUSD Eyes Post-Brexit High
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US equities set to close the week on a high as bank earning get off to a stronger start. This morning JP Morgan, Wells Fargo and Citi all posted better than expected results, adding to the positive risk mood. DJIA futures are indicating a rise as much as 155 points, +0.6% at the Wall Street open.
JPY: Risk sentiment improved over the past 24 hours following relatively conciliatory remarks from President Trump in regards to Chinese trade, while the President Trump has also told his advisors to look at re-entering the Trans-Pacific Partnership Trade Accord (TPP). Naturally, safe havens are weaker with USDJPY breaking persistent resistance at 107.50, next target to the upside is 107.90. A break through could accelerate JPY selling against its counterparts.
GBP: Cable continues to move towards better levels, eying the 1.43 figure to the upside, earlier high at 1.4297. A firm break through could set up a test of the post-Brexit high at 1.4345. Much of the Sterling buying has been seen through EURGBP, moving towards 0.8600 after yesterday’s break of the 2018 low. Near term targets to the downside at 0.8515 (78.6% Fib retracement of 2017 rise from 0.8302-0.9306). Eurozone data relatively uninspiring, confirming that Euro-Area is cooling off, while the Bank of England is expected to raise rates next month.
AUD: The Aussie is the best performer among the G10 currencies following a modest short squeeze which has taken AUDUSD back towards the 0.7800 figure. Buying interest from 1.05 in AUDNZD, alongside a broad revival in risk appetite has kept the Australian Dollar firm this morning. However, consolidation likely seen just above 0.7800 given the potential for escalating Syrian conflict over the weekend.
DailyFX Economic Calendar: Friday, April 13, 2018 – North American Releases
As the week draws to a close, investors will see the release of the latest U. of Michigan Sentiment data, which is expected to dip slightly to 100.5 from 101.4, however the index does still remain at historically high levels. Dallas Fed President Kaplan (Non-Voter) set to speak at 17:00GMT. Of note, Kaplan recently stated that he sees two more rate hikes in 2018.
DailyFX Webinar Calendar: Friday, April 13, 2018
IG Client Sentiment Index Chart of the Day: GBPUSD
GBPUSD: Data shows 33.5% of traders are net-long with the ratio of traders short to long at 1.98 to 1. In fact, traders have remained net-short since Mar 21 when GBPUSD traded near 1.40244; price has moved 1.6% higher since then. The number of traders net-long is 3.2% lower than yesterday and 18.4% lower from last week, while the number of traders net-short is 11.3% higher than yesterday and 42.3% higher from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD 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 GBPUSD-bullish contrarian trading bias.
Learn more about the IG Client Sentiment Index on the DailyFX Sentiment page
Five Things Traders are Reading
- “Central Bank Weekly: US Dollar Gains as FOMC Minutes Point to More Hikes” by Christopher Vecchio, Senior Currency Strategist
- “Charts for Next Week – Euro, GBP-crosses, Gold, Dow & More” by Paul Robinson, Market Analyst
- “US-EU Trade Tensions Unlikely to Ease Amid Growing Trade Surplus” by Justin McQueen, Market Analyst
- “Watch How Gold Closes the Week, Silver Too” by Paul Robinson, Market Analyst
- “EURGBP Support Break Highlights Further Weakness” by Nick Cawley, Market Analyst
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-- Written by Justin McQueen, Market Analyst
To contact Justin, email him at Justin.firstname.lastname@example.org
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