Analys från DailyFX
US Dollar Stems Bleeding as US Yields Level Off
Talking Points:
– US yields have stopped plummeting, helping the US Dollar steady on Monday.
– Consolidation expected as traders position for Tuesday’s unusual NFP release.
– Big event week ahead: US NFPs, BoE Minutes, Japanese inflation (and more).
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INTRADAY PERFORMANCE UPDATE: 09:35 GMT
Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): +0.06% (-1.04% prior 5-days)
ASIA/EUROPE FOREX NEWS WRAP
FX markets are mixed as the US Dollar’s descent has steadied in the wake of the US fiscal deal last week. With attention shifting to incoming Federal Reserve rhetoric, the buck has been taking cues from the bond market. Accordingly, with US yields finding a floor today – the 2-year note yield has decreased to 0.307% (-0.4-bps), the 5-year note yield has increased to 1.332% (+0.2-bps), and the 10-year note yield has increased to 2.585% (+0.7-bps) – we note a pause in USD-denominated asset selling.
There is little doubt that the slowed pace of price action in either direction – one would hardly describe the buck’s +0.06% as a major reversal – is directly related to the unusual US economic calendar for the coming week. In fact, the September US labor market report, which was missed on October 4 due to the government shutdown, will be released tomorrow.
Evidence points to NFP growth holding within its recent +160-184K range, as related jobs indicators – Initial Jobless Claims, the ADP employment survey, the ISM Manufacturing and Services reports’ Employment subcomponents – have been suggesting only modest labor growth through the end of the 3Q’13. Little direct impact due to the government shutdown is expected; hiring behavior likely changed only once the government shutdown became official in October, not ahead of time.
Ultimately, tomorrow’s NFP report may be inconsequential to the US Dollar’s fate next week when the Fed meets for its second-to-last policy meeting of the year – and second-to-last under Chairman Ben Bernanke. The Fed cited US fiscal gridlock as a reason to keep QE3 in place in September; and we find that the manifestation of those fears into reality in October will warrant a hold irrespective of tomorrow’s NFP.
USDJPY5-minute Chart: October218, 2013 Intraday
Read more: Big Week Ahead: US NFPs, Australian and Japanese Inflation, BoE Minutes
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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