Market sentiment analysis:
- Trader confidence is more subdued after the recent strong moves higher in stock prices, crude oil and the ‘risk on’ currency pairs such as AUD/USD, NZD/USD, EUR/USD and GBP/USD.
- That does not mean the rally has ended, and some dip buying could emerge, but there is a risk of a larger precautionary move into safe havens.
Trader confidence dips
Traders have moved away from riskier assets towards safe havens after the recent strong rallies in stock markets, crude oil and the currencies deemed riskier such as AUD/USD, NZD/USD, EUR/USD and GBP/USD. One of the main beneficiaries has been the Japanese Yen, charted below against the Australian Dollar.
AUD/JPY Price Chart, Daily Timeframe (March 10 – June 9, 2020)
Chart by IG (You can click on it for a larger image)
| Change in | Longs | Shorts | OI |
| Daily | 0% | 11% | 5% |
| Weekly | 29% | -25% | -3% |
The latest moves have come against a backdrop of continuing hopes of a V-shaped global economic recovery on central bank largesse and a gradual lifting of coronavirus lockdowns, offset by persistent concerns about trade disputes and worries that the pandemic could return once restrictions are eased.
In this webinar, I looked at the trends in the major currency, commodity and stock markets, at the forward-looking data on the economic calendar this week, at the IG Client Sentiment page on the DailyFX website, and at the IG Client Sentiment reports that accompany it. You might also like to check out the DailyFX Trading Global Markets Decoded podcasts.
What kind of forex trader are you? Check out the six different trader types here
--- Written by Martin Essex, Analyst and Editor
Feel free to contact me via the comments section below
