Institutional bias on the verge of shifting in CAD and JPY, remains extreme long in the Dollar index
Euro and pound underperform for the week, retail bias moves higher in both.
EUR/USD: Finishing the week at the lower end of its bear trend channel
It was a tough week for the euro, lagging against most of the FX majors and breaking its short-term support level in the process, as negative technical bias gains momentum. While it shouldn’t come as a surprise given divergence between the US Federal Reserve (Fed) and the European Central Bank’s (ECB) monetary policies and the divergence in data from the regions over which they apply those policies, it has translated into ongoing weakness for the euro against the greenback. Plenty of items on the economic calendar out of the Eurozone and its manufacturing powerhouse Germany, the latter’s items including CPI, retail, and unemployment today. From a technical standpoint, little needed to shift to an initializing bear trend. In sentiment, Commitment of Traders (CoT) bias is majority short at 58% with euro longs dropping by 3,585 lots and longs down by 11,422 lots.
GBP/USD: Weekly bear trend line holds as positive short-term bias drops
The weekly bear trend line for this pair’s price has managed to hold, with the pound lagging the most amongst the FX majors last week and keeping long-term bias negative with its price below all its main long-term moving averages. On the daily outlook, positive bias is eroding quickly with the outlook also relatively consolidatory but prone to breakouts on any Brexit related news, with the latest that the UK government is set to offer proposals to the EU this week to try and reach a deal prior to the 31 October deadline. Retail bias has risen slightly to a heavy long 71% as fresh shorts get enticed into taking profit, while institutional bias has dropped a couple notches but remains in extreme short territories at 81%, thanks to an increase in pound longs by 3,114 lots and a simultaneous reduction in pound shorts by 2,215 lots. Q2 GDP figures will be released later today.
USD/JPY: Greenback finishes higher against the yen but not by much
Thus far, it has been mostly consolidatory moves befitting its consolidatory technical outlook whereby its price is below all its main long-term weekly moving averages (MA) but above all its main short-term weekly MA’s. On the daily outlook, its also consolidatory but showing more positive technical bias and with a trending Average Directional Index (ADX). This week is a significant one in terms of risk given the significant Purchasing Managers’ Index (PMI) data that’ll be released, with both Japan’s Tankan and US ISM readings no exception to that rule. In terms of the Bank of Japan (BoJ), the focus has been on the loss of momentum in inflationary readings, and Friday’s Tokyo core Consumer Price Index (CPI) figure showed a worse than expected drop to rise by only 0.5%. In sentiment, CoT bias is shifting closer to the middle as investors reduce yen long positioning by 5,083 lots and increase short positioning by 5,996 lots, reducing majority short bias by 7% to 58%.
USD/CAD: A consolidatory finish for the week befitting its consolidatory technical overview
It was another consolidatory week for this pair’s price, with relatively range-bound movement even as the Canadian dollar (CAD) outperformed against most of the FX majors, but with the US dollar not that far off in terms of keeping up. And this week the main focus in terms of data will be on Friday’s US Non-Farm Payrolls, with plenty of Canadian data prior including GDP and PMI readings. From a technical standpoint, both daily and weekly are consolidatory but with a positive Directional Movement Index on the latter. As with the yen, CoT bias is pushing closer to the middle, with a massive 21,681 lot reduction in CAD longs outdoing a smaller reduction in CAD shorts by 6,450 lots, and the net result a 7% drop in majority short bias to a slight short 53% and on the verge of shifting back to majority long for the first time since June. Retail bias is heavier to the short side at 66%.
AUD/USD: All eyes on tomorrow morning’s Australian central bank announcement
It’s a big week for both aspects of this pair with NFP and ISM the highlight for the greenback, and the Reserve Bank of Australia’s (RBA) monetary policy announcement the big one for the Australian dollar. As it stands, the Australian central bank is expected to reduce rates by 0.25% as per the market’s majority expectation and would take it down to 0.75%. Both daily and weekly technical outlooks are negative, with its price below all its main short-term and long-term moving averages on both charts, and with the bear trend channel holding as seen on the weekly chart. However, central bank announcements and fundamental data make technicals less relevant and entice breakout strategies and possibly reversals over fading ones that’ll be more prone to getting stopped out. Going into this Tuesday’s event retail traders are heavy long at 67% while institutional bias is an exact opposite heavy short 67%.
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