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MARKET DEVELOPMENT – USD SLIDES PERSISTS, TRUMP CRITICISES FED AGAIN

USD: The US Dollar has continued its slide, weakening against its major counterparts for much of the session with the Dollar index testing a break below 95.00. The latest inflation figures underwhelmed expectation with both the headline and core readings falling short of analyst estimates. Elsewhere, President Trump continued to criticise the Federal Reserve’s monetary policy tightening stance following yesterday’s equity market rout with the President stating that the Fed are too aggressive. In response to this, Fed rate hike expectations dipped alongside US bond yields.

SEK: The Swedish Krona is the notable outperformer following today’s firm CPI report, whereby the headline reading printed at 2.5%, above the Riksbank’s forecast of 2.2%. Consequently, this has improved the likelihood that the Riksbank could raise interest rates by the year end. As such, EURSEK is off 1%, eying a breach through 10.40 before a test of the 100DMA situated at 10.37.

TRY: The Turkish Lira, which is typically seen as the general proxy for EM sentiment has strengthened on the back of the Turkish Current data, which produced a surplus for the first time is 3yrs. This has largely stemmed from the reach plunge observed in the Lira. However, the key event will be tomorrow’s court hearing for American Pastor Brunson, in which a release will likely support the Lira amid a reduction in Turkish-US tensions.

DailyFX Economic Calendar: Thursday, October 11, 2018 – North American Releases

USD Falls as Trump Criticises Fed Policy, while CPI Underwhelms - US Market Open

DailyFX Webinar Calendar:Thursday, October 11, 2018

USD Falls as Trump Criticises Fed Policy, while CPI Underwhelms - US Market Open

IG Client Sentiment: S&P 500 Chart of the Day

USD Falls as Trump Criticises Fed Policy, while CPI Underwhelms - US Market Open

US 500: Data shows 46.8% of traders are net-long with the ratio of traders short to long at 1.13 to 1. In fact, traders have remained net-short since May 03 when US 500 traded near 2604.76; price has moved 6.2% higher since then. The percentage of traders net-long is now its highest since Jun 08 when US 500 traded near 2778.76. The number of traders net-long is 12.0% higher than yesterday and 36.6% higher from last week, while the number of traders net-short is 21.8% lower than yesterday and 30.8% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests US 500 prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current US 500 price trend may soon reverse lower despite the fact traders remain net-short.

Five Things Traders are Reading

  1. S&P 500 Technical Outlook – Just Like That, Big Trend Support Test Upon UsbyPaul Robinson, Market Analyst
  2. Slowdown in U.S. Consumer Price Index (CPI) to Fuel EUR/USD Reboundby David Song, Currency Analyst
  3. Will China be Labelled as a "Currency Manipulator"?by Justin McQueen, Market Analyst
  4. Bitcoin Price Chart – Triangle Breakout to Further Along Crypto-bust” by Paul Robinson, Market Analyst
  5. GBP Outlook: Sterling in a Holding Pattern as Brexit Talks Intensify” by Nick Cawley, Market Analyst

--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX