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Monday was a day of overall US Dollar weakness as US President Donald Trump accused China and Russia of devaluing their currencies. The attack came at a time when the two largest economies are trying to compromise on tariff negotiations. Things were looking good last week on this front as sentiment rebounded when both Trump and China’s President Xi Jinping offered positive developments.
Nevertheless, Wall Street finished Monday’s session higher with the S&P 500 and Dow Jones up 0.81% and 0.87% respectively. This was in-part due to a rise in health-care supply companies which welcomed the news that Amazon Inc. shelved plans to sell pharmaceutical products. In addition, ebbing geopolitical tensions over Syria probably also contributed to the rise in stocks.
However, most currencies showed a rather mixed performance. Especially the ones that are sensitive to risk trends. This included the Japanese Yen, Australian and New Zealand Dollars. The British Pound was the best performing major across the board, almost perfectly inversely tracking the US Dollar. Crude oil prices declined, probably because of easing tensions around Syria.
Ahead, China’s first quarter GDP release is the top tier event risk during the Asian trading session. Data out of the country has been underperforming as of late, opening the door for a downside surprise. Such a scenario presents a potential risk for currencies like the Singapore Dollar or Malaysian Ringgit due to their affiliated countries having key trading relationships with China.
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IG Client Sentiment Index Chart of the Day: EUR/JPY
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Retail trader data shows 44.6% of traders are net-long with the ratio of traders short to long at 1.24 to 1. In fact, traders have remained net-short since Apr 09 when EUR/JPY traded near 131.51; price has moved 0.9% higher since then. The number of traders net-long is 14.6% lower than yesterday and 22.1% lower from last week, while the number of traders net-short is 6.2% lower than yesterday and 12.1% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EUR/JPY 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 EUR/JPY-bullish contrarian trading bias.
Five Things Traders are Reading:
- TIC Data Shows Chinese Appetite for US Assets Rose Before Tariffs by Peter Hanks, DailyFX Research
- USD/JPY Rate Forecast: Knock, Knock, Knocking on Key 108-Level by Tyler Yell, CMT, Forex Trading Instructor
- FX Overbought/Oversold: It’s Tough To be a British Pound Bear Out There by Tyler Yell, CMT, Forex Trading Instructor
- FX Markets Look to US Retail Sales, UK & Japanese CPI, BOC, & More by Christopher Vecchio, Sr. Currency Strategist
- Weekly Technical Perspective on NZD/USD, GBP/USD and EUR/NZDby Michael Boutros, Currency Strategist
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--- Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com
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