Analys från DailyFX
FX Markets Shift Attention to FOMC as AUD, NZD Lead JPY, USD
Talking Points:
– Appetite for risk in FX returning as Chinese fears abate, Fed eyed on Wednesday.
– EURUSD and GBPUSD treading water near $1.3800 and $1.6200, respectively.
– Monday’s mixed US calendar might not help US Dollar.
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INTRADAY PERFORMANCE UPDATE: 09:45 GMT
Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): -0.09% (-0.36% prior 5-days)
ASIA/EUROPE FOREX NEWS WRAP
Chinese liquidity fears that gripped global markets in the second half of last week failed to swell over the weekend, and with the Federal Reserve’s Wednesday policy meeting expected to show a continuation of QE3 at $85B/month, investors are happily ditching the safe haven assets in favor of higher yielding currencies and risk-correlated assets.
The US Dollar continues to broadly underperform, though with gains accruing versus the Japanese Yen and the Swiss Franc, it appears that the overall mood of the market is being lifted. While US Dollar selling against the European currencies accelerated over the past few hours (suggesting a more USD-centric focus), the scope of the declines is far less dramatic than what was seen during the US government shutdown.
That being said, with FX pricing in a dovish Fed, a look at bond markets shows that the previously observed “untapering” of the US yield curve hasn’t continued. US Treasury yields are a touch higher on the day, with the 2-year note yield having increased to 0.303% (+0.4-bps) and the 10-year note yield up having increased to 2.520% (+1.1-bps). If the run-up to FOMC on Wednesday was going to be more about USD-selling and less about “risk”-buying, US yields would be continuing their fall.
AUDJPY5-minute Chart: October 28, 2013 Intraday
Accordingly, the move in FX markets may be a “catch up” of sorts after the dislocation in the Australian and New Zealand Dollars and the Japanese Yen on Wednesday, with the AUDJPY and NZDJPY as harbingers of risk in FX. Barring a greater leg down in US yields, AUDJPY and NZDJPY would be preferred to AUDUSD and NZDUSD, respectively if risk appetite continues to build going into the Fed meeting.
Read more: Europe’s Relative Calm Boosting Interest in the Euro
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
You can receive Paul’s analysis directly via email bysigning up here.
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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