Analys från DailyFX
Japanese Yen Rallies, Aussie Suffers as US Fiscal Issues Remain Elevated
Talking Points:
– Day six of the US government shutdown and few signs of resolution.
– US debt limit hit on October 17 (10 days).
– ‘Feels like 2011’ with safe havens (CHF, JPY, USD) rallying against commodity currencies (AUD, CAD, NZD).
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INTRADAY PERFORMANCE UPDATE: 09:30 GMT
Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): -0.05% (-0.42%prior 5-days)
ASIA/EUROPE FOREX NEWS WRAP
Friday’s hopes for a budget deal have seemingly faded as market participants have started to come to terms with the reality of the United States’ political impasse. With the US government on day six of its shutdown, few signs have emerged that leaders from either political party will back down from their ideological platforms, increasing the likelihood of further unease as the debt limit approached on October 17.
Regardless of political affiliation, the continued uncertainty over the United States’ fiscal future is a poor development for risk trends and the US Dollar. In fact, markets are starting to behave similarly to how they did in July 2011. At that time, market observers focused on “risk on” versus “risk off “ conditions – necessitated by the tightening of correlations amid heightened sensitivity to news headlines.
Now, cross-asset correlations have started to realign, suggesting that investors are once again seeing the world through the narrow lens of “risk on” versus “risk off.” The AUDUSD and SP 500’s rolling 20-day correlation has tightened back to +0.73 as of today, from +0.41 on September 9, and -0.03 on August 5. In context of recent moves in US Treasuries, there are growing signs that the US debt debacle is no longer just on the periphery of investors’ minds.
The safe havens – the Japanese Yen and the Swiss Franc – should stand to benefit above all else if the October 17 deadline creeps forward without any tangible resolution in sight. The US Dollar should benefit too, especially against the commodity currencies; though we would expect USDCHF and USDJPY to remain under pressure.
AUDJPY 5-minute Chart: October 7, 2013 Intraday
Taking a look at European credit, the Italian 2-year note yield has increased to 1.629% (+0.4-bps) while the Spanish 2-year note yield has decreased to 1.324% (-1.9-bps). Likewise, the Italian 10-year note yield has increased to 4.292% (+0.1-bps) while the Spanish 10-year note yield has decreased to 4.194% (-0.2-bps); lower yields imply higher prices.
Read more: Should US Fiscal Tensions Ease, Euro Will Ultimately Gain
ECONOMIC CALENDAR – UPCOMING NORTH AMERICAN SESSION
See the DailyFX Economic Calendar for a full list, timetable, and consensus forecasts for upcoming economic indicators. Want the forecasts to appear right on your charts? Download the DailyFX News App.
— Written by Christopher Vecchio, Currency Analyst
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
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What’s inside:
- EURUSD broke the ‘neckline’ of a bearish ‘head-and-shoulders’ pattern, April trend-line
- Resistance in vicinity of 11825/80 likely to keep a lid on further strength
- Targeting the low to mid-11600s with more selling
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Coming into last week we pointed out the likelihood of finally seeing a resolution of the range EURUSD had been stuck in for the past few weeks, and one of the outcomes we made note of as a possibility was for the triggering of a ’head-and-shoulders’ pattern. Indeed, we saw a break of the ’neckline’ along with a drop below the April trend-line. This led to decent selling before a minor bounce took shape during the latter part of last week.
Looking ahead to next week the euro is set up for further losses as the path of least resistance has turned lower. Looking to a capper on any further strength there is resistance in the 11825-11880 area (old support becomes new resistance). As long as the euro stays below this area a downward bias will remain firmly intact.
Looking lower towards support eyes will be on the August low at 11662 and the 2016 high of 11616, of which the latter just happens to align almost precisely with the measured move target of the ‘head-and-shoulders’ pattern (determined by subtracting the height of the pattern from the neckline).
Bottom line: Shorts look set to have the upperhand as a fresh month gets underway as long as the euro remains capped by resistance. On weakness, we’ll be watching how the euro responds to a drop into support levels.
For a longer-term outlook on EURUSD, check out the just released Q4 Forecast.
EURUSD: Daily
—Written by Paul Robinson, Market Analyst
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You can follow Paul on Twitter at@PaulRobinonFX.
Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
EURUSD: Retail trader data shows 37.3% of traders are net-long with the ratio of traders short to long at 1.68 to 1. In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.07831; price has moved 9.6% higher since then. The number of traders net-long is 15.4% lower than yesterday and 16.4% higher from last week, while the number of traders net-short is 0.4% higher than yesterday and 10.5% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EURUSD trading bias.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
GBPUSD: Retail trader data shows 38.2% of traders are net-long with the ratio of traders short to long at 1.62 to 1. In fact, traders have remained net-short since Sep 05 when GBPUSD traded near 1.29615; price has moved 3.4% higher since then. The number of traders net-long is 0.1% higher than yesterday and 13.4% higher from last week, while the number of traders net-short is 10.6% lower than yesterday and 18.3% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD 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 GBPUSD price trend may soon reverse lower despite the fact traders remain net-short.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
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