Daily Market Report: EURUSD, GBPUSD, USDJPY, USDCAD, AUDUSD
Fed Chair Powell to testify this evening with the central bank's minutes released after
EURUSD: All eyes on this evening’s Powell testimony and Fed minutes release
Data was light yesterday out of the Eurozone, and it’s set to remain that way until tomorrow with market focus in the meantime squarely on the Fed and the BoC. Today’s testimony from Fed Chair Powell combined with the release of the Fed minutes later in the evening will likely set the tone from here until the end of this month’s Fed meeting whereby the US central bank is expected to cut rates by 0.25% – fully priced in by money markets at this stage. That will mean FX flows will likely be dictated by the US dollar, and indirectly by the effect it’ll have on money markets and equities that are anticipating easing to justify current price levels. Going into tonight’s event retail traders are heavy long at 66%, while institutional traders are majority short at 55%.
GBPUSD: Mid-term resistance level breaks as losses accumulate
The pound took another hit yesterday, marking six days of losses over the past seven trading days, and breaking its mid-term support level with major issues remaining unresolved. And with the technicals remaining bearish and most of its technical indicators flashing red, we’ve got fundamental items on the economic calendar effecting both aspects of this pair. On the GBP side, GDP, manufacturing, construction, and trade data will be released simultaneously. While on the US side, it’s a big day for the greenback as the focus later in the day will shift to Powell and the Fed’s minutes. Going into both events retail traders are extreme long at 84% with the bulk of those longs initiated at higher price levels, while institutional bias is heavy short at 74%.
USDJPY: USD strength continues to take this pair higher, breaches its short-term resistance level
With the yen suffering over the past few days and the greenback strengthening, the pair’s price managed to cross above its short-term resistance level and offer more positive technical bias in the process. As it stands, it’s on the verge of crossing above its 50-day moving average, as more technical indicators are flashing green. Furthermore, the gains have aided retail traders who are heavy long the pair and have reduced that bias by 2% to a majority long 64% as longs get enticed into taking profit. Institutional traders on the other hand haven’t been beneficiaries of the latest moves, as their extreme short bias in the yen (i.e. extreme long USD/JPY (大口）) got squeezed on the way down to the 106s, and have since been removing short yen positions, standing at only a slight majority long 51% as of last week.
USDCAD: Big day for both aspects of this pair with the BoC, Powell testimony, and Fed minutes
It's a big day for this pair, with central bank announcements effecting both aspects, as testimony from the Fed Chair and minutes will effect the USD aspect of this pair, while the BoC's announcement is set to keep the CAD aspect lively. The latter is set to keep rates on hold at 1.75% as Canadian data turned more dismal as of late. The combination of heavy fundamental items on the calendar will keep this pair’s technicals irrelevant in the process, though as it stands it’s a bear trend technical overview that’s been severely tested over the past few trading days with the greenback gaining strength. Going into tonight’s events retail traders are heavy long at 69% and anticipating retracement, while institutional traders are majority short 54% having only recently shifted from majority long.
AUDUSD: AUD lags as commodity currencies underperform
Commodity currencies underperformed against the FX majors yesterday, with the Australian dollar lagging the most in the process. That, against a strengthening greenback and amidst dismal Australian data in the form of a NAB’s decline (and today’s Westpac sentiment contracting significantly) has resulted in a sizeable drop in the commodity currency’s price, and in the process sent it below all its main moving averages with its ADX showing a propensity to trend. Negative technical bias has clearly formed, yet with tonight’s Fed announcement it’s likely USD flows will dictate where USD-denominated pairs will end up, as well as commodities priced in dollars that’ll serve as the underlying for commodity currencies like the Australian dollar. Retail bias is rising as shorts get enticed into closing out, while institutional bias has remained at relatively consistent heavy short levels.
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