Pound outperforms for the week, Canadian dollar in second place
Safe haven yen and franc underperform as risk appetite improves following US-China trade ‘understanding’.
EUR/USD: Rising off the highs but still within its weekly bear trend channel
It has been difficult to place this pair’s technical overview into a bear trend despite a clear bear trend channel on the weekly chart, and that has been due to a lack of downside momentum, with retracement back up occurring more often as was the case this past week (and the week before). In technical news, a positive Directional Movement Index (DMI) cross did occur last week, but the bulk of its weekly indicators are neutral and with a non-trending Average Directional Index (ADX). In sentiment, the latest Commitment of Traders (CoT) report shows majority short bias rising a notch to 59% on a reduction in euro longs by 9,508 lots and little change in shorts. As for smaller traders, the bias has shifted on long profit-taking as at the start of last week the bias was majority long 62% and is now at a slight short 52%.
GBP/USD: Outperforming for the week against the remaining FX majors
Just after its technical overview on the daily was showing signs of an initializing bear trend early Thursday, Brexit optimism fueled the pair’s price significantly higher to take it above most of its main daily moving averages, and nearly above its 50-week moving average as seen on the chart. On the daily, its bearish bias has been undone, and on the weekly its bear trend channel has been breached. Ahead of this month end’s Brexit deadline its likely the pound will experience volatility on any release of rumors/news that would push its price well past pivot points either above or below its Relative Starting Point, and hence breakout strategies under those circumstances may be more ideal. As for sentiment, CoT bias is little changed and remains extreme short at 78%, while IG’s traders were in for big profit-taking on the long side, as it was 74% heavy long, and is now 17% less at 57%.
USD/JPY: Risk appetite improves amongst investors, hurting the safe haven yen
More positive technical bias is forming for this pair’s price, as on the daily chart it has breached its short-term resistance level and is now above all its main short-term weekly moving averages. The catalyst however, was fundamental, and both Japanese yen and Swiss franc underperformed last week as increased investor risk appetite sent safe haven products plummeting. Given all three main long-term weekly moving averages (50, 100, and 200-week) are closely huddled towards each other, a breach in one could result in a breach for all three, and in the next five weeks as a trade deal is set to get put on paper (or not) may keep this pair’s price volatile. Retail sentiment has shifted here as longs take profit, and any further price increases could squeeze shorts heavily. As for CoT, majority short bias is moving closer to the middle with yen longs down by 5,090 lots as opposed to a smaller reduction in yen shorts by 2,185 lots.
USD/CAD: Canadian dollar the second-best performer after the pound
The Canadian dollar was the second-best performer amongst the FX majors after the pound, easily erasing any positive technical bias on the daily chart and pushing the pair’s price to cross below its 50-week moving average as seen on the weekly chart. But it wasn’t just due to higher oil prices aiding the Canadian dollar’s energy underlying, but better than expected Canadian employment figures that showed its unemployment rate drop a couple of notches to 5.5% on a 53.7K increase in employment. Should oil regain its footing and retrace higher or Canadian data impress like Consumer Price Index (CPI) figures this Wednesday and we could see further price drops, and possibly shift retail sentiment in USD/CAD to majority long, given it has already dropped 23% since the start of last week and is now nearly in the middle.
AUD/USD: Finishing the week in the green but not by a healthy margin
Having avoided fresh lows for the week, the Australian dollar managed to finish slightly higher against the greenback for the week and undo its stalling bear trend technical overview on the daily. On the weekly chart however, it’s clear that the bear trend channel is still holding and will need more to breach both it and its 50-week moving average. Most of its main technical indicators remain neutral, and hence a consolidatory weekly outlook that’s still showing long-term negative bias has been most ideal. The lack of upside movement hasn’t given a big chance for long positions to take profit, and hence retail bias has only dropped by 4% since the start of last week and remains in heavy long territories at 66%. CoT bias hasn’t budged from a heavy short 68%. Should risk appetite improve and any trade talks inked on paper, and the proxy currency could witness further gains.
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