Australian dollar lags heavily following RBA, yen and franc rise on US ISM contraction
Safe haven yen and franc rise on rising recessionary fears, while the Australian dollar drops following 0.25% rate cut.
EUR/USD: Worsening US manufacturing figures aid retail longs in taking profit
The data released out of the Eurozone wasn’t positive with final manufacturing Purchasing Managers’ Index (PMI) surveys confirming contraction and preliminary Consumer Price Index (CPI) reading dropping a notch to 0.9% aiding European Central Bank (ECB) easing with inflationary pressures subsiding. However, the financial markets were in for a rude awakening when US Institute for Supply Management’s (ISM) manufacturing PMI showed contraction at its worst pace in over a decade and took the pair’s price off the lows in the process. Retail longs that were on the verge of getting squeezed were beneficiaries, and majority long bias has dropped 7% to 68% on long profit-taking, with far more needed for longs initiated at higher price levels to get out in profit. And while a finish in the green helps, it hasn’t been able to shake off its bear trend channel on both the daily and weekly outlook.
GBP/USD: Finishing close to where it started for a second consecutive session
There was little change in this pair’s price following a second consecutive session of range-bound movement. UK manufacturing PMI was better than expected but still contracting ahead of construction data later today, but the US dollar was in retreat following contraction in its manufacturing sector and it aided the pair’s price in rising off the lows. Retail sentiment is little changed but still in heavy long territories, and while the technical overview is consolidatory with a touch of negative bias, the UK’s prime minister Johnson will be revealing his Brexit offer to the European Union today, and depending on the details could entice breakout strategies over fading ones.
USD/JPY: Safe haven outperforms as global recessionary risks rise
Both Swiss franc and Japanese yen were thrown a lifeline following US ISM’s contraction yesterday, as rising recessionary risks and worsening economic data sent investors fleeing to safely, and aiding both safe haven currencies in the process. No surprise then that they outperformed against the remaining FX majors, and with this pair’s price it has crossed back below its 100-day moving average as its short-term resistance level holds. Risk appetite and USD reaction will likely be the items to look out for with Automatic Data Processing (ADP) set to give its Non-Farm estimate later today, but its affect is usually short-lived given more sizeable positioning occurs with Friday’s official estimate.
USD/CAD: CAD outperforms against the greenback despite lack of GDP growth and lower energy
While energy prices retreated for most of the session and Canada’s GDP didn’t show any growth, the pair’s price managed to edge lower instead thanks to weakness in the US dollar following its notable ISM manufacturing contraction. The eventual price drop aided heavy short retail traders into taking profit, and reducing the bias to more modest short levels of 62%. More negative technical bias is forming with the pair’s price crossing and remaining below all its main moving averages, though keep in mind that in the absence of significant Canadian data until Friday’s Ivey PMI release it’ll be energy and the greenback that’ll be the items to look out for.
AUD/USD: Underperforming heavily following the Australian central bank’s 0.25% rate cut
With the Reserve Bank of Australia’s (RBA) 0.25% rate cut yesterday, the commodity currency was in for a big plummet, taking the pair’s price towards its mid-term support level and with its technical overview on the verge of shifting to an initializing bear trend. And although the US dollar was weaker against most of the FX pairs, the Australian dollar lagged the most. It doesn’t help the currency’s price that the central bank is willing to apply more easing if needed, even if its current 0.75% rate is at a record low. Retail traders were squeezed hard in the price drop, as heavy long 68% retail bias rose 10% to an extreme long 78%.
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