Pound outperforms in the FX market while safe haven yen and franc lag
Technical overview shifts for USD/CAD and AUD/USD despite fundamental outlook.
EUR/USD: Countdown to the ECB
What little data that was available out of the Eurozone showed Germany’s trade balance improve (unlike China’s over the weekend which worsened), and Sentix’s investor sentiment figure better than expected though still contracting. More light data awaits today with industrial production figures for both France and Italy not expected to impress, though the real focus will remain on this Thursday’s ECB, and not just for the euro but for risk-appetite on the bloc (and beyond it). From a technical standpoint, the lack of downside momentum and what has been primarily intraday oscillations has caused a shift in its technical overview to a more consolidatory outlook, though given price is below all its main long-term moving average could entice sell breakout strategies for those expecting its bear trend channel to hold.
GBP/USD: Pound outperforms and strategies in line with its volatile consolidatory outlook
The focus was primarily on the UK Parliament’s vote, and given they’ll be out until October 14 with Brexit woes still unresolved, a law was passed requiring a Brexit delay should a divorce deal not be finalized with the EU. In terms of data, it was a positive surprise out of the UK, with month-on-month GDP growing above expectations at 0.3%, manufacturing and construction avoiding contraction they had suffered last month, and its trade deficit dropping. Employment data is up next, though the volatility we’ve been seeing in this pair following the pound’s top performance amongst the FX majors yesterday can trace its source to Brexit. More positive technical bias is emerging for this pair’s price on the daily chart, but far more will be needed to undo its bear trend channel on the weekly.
USD/JPY: Safe haven currencies suffer as more positive technical bias emerges
Both safe haven currencies’ Swiss franc and Japanese yen lagged the most yesterday against the remaining FX majors, and took the price of this pair crossing its 50-day moving average to finish above it. More positive technical bias is emerging, though safe haven will need ongoing weakness prior to ensure gains in this pair’s price and entice buy breakout strategies over conformist sell reversal ones. Japanese data showed GDP down a notch at 0.3%, with lending and current account worse than expected. Retail bias is unchanged at a majority long 64% and near exact opposite institutional bias of a heavy short 66% that as per the latest CoT report has been dropping as larger drops reduce yen longs and up short positions.
USD/CAD: Both USD and CAD in a tussle following consolidatory session
It’s a technical overview shift for this pair’s price to an initializing bear trend, but where the catalyst for recent price drops has been emanating from the energy market as oil prices managed to outperform and breach its bear trend channel. Both USD and CAD relatively underperformed compared to the remaining FX majors, and as it stands from a technical standpoint its price is below all its main moving averages, piercing the lower extremes of the band, and combined with a trending ADX. Both retail and institutional bias are at a slight majority short 53%, and on the verge of shifting to majority long for the former should shorts continue to take profit on another price drop.
AUD/USD: Technical overview shift on the daily as short-term bullish bias runs up against long-term bearish bias
While the weekly outlook is showing a consolidatory overview with negative bias and a bear trend channel holding, on the daily outlook it’s a shift to an initializing bull trend whereby its price just crossed above its 50-day moving average, a positive DMI, and a trending ADX. Iron ore – a key export – surged yesterday though gave up some of those gains later in the session. Intraday gains thus far have bene limiting however, and hence conformist buy breakout strategies could get tested. Both AUD and NZD outperformed yesterday, and in terms of data this morning’s business confidence figure was below previous and ahead of tomorrow morning’s consumer sentiment release.
This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.
See an opportunity to trade?
Go long or short on more than 17,000 markets with IG.
Trade CFDs on our award-winning platform, with low spreads on indices, shares, commodities and more.
Live prices on most popular markets
- Forex
- Shares
- Indices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
