See our 3Q forecasts for the US Dollar, Yen and Equities in the DailyFX Trading Guides page
US Session Developments – Apple Surpasses $1 Trillion Market Cap, Sentiment Improves
A deterioration in sentiment during the Asian and European sessions sent the Nikkei 225 and the Euro Stoxx 50 lower. Then, market-wide mood significantly turned around as Wall Street trading got underway. Apple Inc. became the first US company so surpass a $1 trillion market cap as shares rose more than 2.5%. This was in the aftermath of Tuesday’s upbeat earnings report.
The rise in Apple and information technology helped boost the S&P 500 and NASDAQ Composite 0.49% and 1.24% respectively. However, sentiment-linked currencies like the Australian and New Zealand Dollarswere unable to capitalize on gains. This was largely thanks to a stronger US Dollar that basked in the glory of a less hawkish Bank of England rate announcement that led to British Pound weakness.
Despite the recovery in risk appetite, the Japanese Yen remained stronger thanks gains during Thursday’s Asia/Pacific trading session. Meanwhile sentiment-linked crude oil prices rallied which helped lift the Canadian Dollar to a certain extent. The latter tends to follow the commodity at times due to its impact on Canadian revenue. Gold prices, the anti-fiat unit, fell amidst greenback gains.
A Look Ahead – Risk Trends in Focus
Asia/Pacific benchmark indexes could echo gains from Wall Street and weaken the anti-risk Japanese Yen. At the flipside of the majors FX spectrum, AUD and NZD could yet rise. While sentiment could improve in the near-term, the threat of a trade war still overshadows equities. On Thursday, China’s Ministry of Commerce said it was ready to retaliate after the most recent US tariff threat from Donald Trump.
DailyFX Economic Calendar: Asia Pacific (all times in GMT)
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IG Client Sentiment Index Chart of the Day: AUD/USD
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Retail trader data shows 64.0% of AUD/USD traders are net-long with the ratio of traders long to short at 1.78 to 1. In fact, traders have remained net-long since Jun 05 when AUD/USD traded near 0.75456; price has moved 1.9% lower since then. The number of traders net-long is 4.3% higher than yesterday and 0.1% lower from last week, while the number of traders net-short is 13.0% lower than yesterday and 15.0% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests AUD/USD 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 AUD/USD-bearish contrarian trading bias.
Five Things Traders are Reading:
- Pre-NFP Price Action Setups Across the US Dollar by James Stanley, Currency Strategist
- GBP/USD: Net-Longs Reach 70% As Price Continues To Decline by Yayati Tanwar, DailyFX Research Team
- Weekly Technical Perspective on Aussie vs Japanese Yen (AUD/JPY) by Michael Boutros, Currency Strategist
- Gold Prices Risk Fresh 2018 Lows as RSI Flirts with Oversold Territory by David Song, Currency Analyst
- Dow Drops to Support After FOMC-Fueled Pullback by James Stanley, Currency Strategist
--- Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter
