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MARKET DEVELOPMENT – USD HOLDS SUPPORT, GBP CHOPPY ON BREXIT STAND-OFF

USD: Much like equity markets, the US Dollar is softer with the 95.00 handle holding for now. US retail sales data underwhelmed expectations, consequently adding to the weaker USD theme. Elsewhere, speculative positioning data showed USD long bets increase once again, however, much of these bets comprise of JPY shorts, which has outperformed in in recent sessions giving the equity market rout. As such, this leaves USDJPY vulnerable to further losses provided that equities continue to sell-off.

GBP: Brexit talks reached a stand-off over the weekend as issues over the Irish border persist. Consequently, talks between both parties have been placed temporarily on hold ahead of the summit, which in turn had pressured Pound, initially falling below 1.31, before clawing back losses. Source reports noted that the EU is said to accept backstop if it has one of its own as well. Headline risk continues to remain elevated, as such, the Pound has had a somewhat choppy session thus far.

EUR: The CSU (Christian Social Union), the Bavarian sister party to Chancellor Merkel and a key component of Merkel’s fragile coalition government lost its absolute majority. However, this has not fazed the Euro this morning, given that this had largely been expected, alongside this, the second largest party is now the far-left green party as opposed to the far-right Afd party. The Euro largely supported on the back of USD weakness with the pair hovering around the 1.16 handle.

DailyFX Economic Calendar: Monday, October 15, 2018 – North American Releases

USD Holds Support, GBP Choppy on Brexit Stand-Off - US Market Open

DailyFX Webinar Calendar: Monday, October 15, 2018

USD Holds Support, GBP Choppy on Brexit Stand-Off - US Market Open

IG Client Sentiment: USDJPY Chart of the Day

USD Holds Support, GBP Choppy on Brexit Stand-Off - US Market Open

USDJPY: Retail trader data shows 50.6% of traders are net-long with the ratio of traders long to short at 1.02 to 1. The number of traders net-long is 7.9% higher than yesterday and 19.4% higher from last week, while the number of traders net-short is 15.1% lower than yesterday and 38.2% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USDJPY 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 USDJPY-bearish contrarian trading bias.

Five Things Traders are Reading

  1. UK Week Ahead: Brexit Update and Heavyweight Data | Webinar” Nick Cawley, Market Analyst
  2. Weekly CoT Update: Speculative Selling in Gold Proving Untimelyby Paul Robinson, Market Analyst
  3. GBP Analysis: Brexit Negotiations Gridlocked, Key Issues Remainby Nick Cawley, Market Analyst
  4. Gold Price Analysis: Bulls in Control with Record Shorts at Risk” by Justin McQueen, Market Analyst
  5. USDJPY Breaks Key Trendline as Risk Sentiment Remains Fragile” by Justin McQueen, Market Analyst

--- Written by Justin McQueen, Market Analyst

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

Follow Justin on Twitter @JMcQueenFX