Safe haven currencies lag, commodity currencies outperform
Risk-on as tariff delay sends equities and commodity currencies higher and safe haven currencies dropping.
EURUSD: Preliminary GDP figures set to be released with Germany possibly experiencing contraction
ZEW figures for both Germany and the overall Eurozone were a disappointment yesterday, plunging to levels unseen since 2011 and affirming worries for the bloc and its manufacturing powerhouse ahead of today’s preliminary GDP release whereby expectations are for Germany to suffer a 0.1% contraction. Manufacturing PMIs have been contracting as of late, a serious casualty of the recent trade war. That, combined with Italian political woes and data that has been relatively worse compared to the US, is preventing this pair from enjoying significant gains, whereby the technical bias remains negative with its price below all its main long-term moving averages. Retail bias has pushed 6% higher to a majority long 59%, while institutional bias is little changed at a majority short 57% thanks to an increase in euro longs by 2.9K lots and a simultaneous reduction in shorts by 7.1K lots.
GBPUSD: Oscillating at the lows with its stalling bear trend technical overview intact
It’s been a difficult run for this pair, with Brexit woes and the increased uncertainty keeping the pair’s price oscillating near the lows, and in the process keeping intact its current technical overview of a bear trend that is slightly stalling and showing a lack of follow. Employment figures yesterday showed the unemployment rate rise a notch to 3.9%, and CPI figures are up next later today expected to show a 1.9% increase with its core at 1.8%. Retail bias remains at extreme long levels of 79% and a couple percentage points higher, while the latest CoT report shows institutional bias inching higher towards extreme short territories at 77% due to a larger increase in pound shorts by 16K lots compared to a 3.3K lot increase in pound longs.
USDJPY: Safe haven currencies underperform following tariff delay
Safe haven currencies were the worst performers amongst the FX majors yesterday, with both yen and franc taking a hit following the US decision to delay tariffs on some Chinese imports from September until mid-December. That is testing its current technical overview of an initializing bear trend that is stalling thanks to fundamental forces as yesterday’s risk-on event overcame technical forces. Furthermore, if the yen were to strengthen significantly (i.e. USDJPY drop), it would tempt the central bank into increasing easing further, with a Reuters poll saying that those chances are rising. In terms of bias, retail sentiment is heavy long at 70%, while institutional bias has shifted from a previous majority long 53% to a now majority short 56% due to an increase in yen longs by 9.2K lots and a simultaneous reduction in yen shorts by 5.6K lots.
USDCAD: Commodity currencies outperform in classic risk on trade
The tariff relief was good news for commodities and equities, and in the process took commodity currencies higher like the Canadian dollar, especially following the rise in oil back up aiding its energy underlying. As it stands, the pair’s short-term bull trend line has been broken following weeks of relatively consolidatory movement, and most of its indicators are neutral with a non-trending ADX. Retail bias has risen significantly to a heavy short 65%, and not that far off from institutional bias of 62% on a large reduction in CAD shorts (by 5.2K lots) than CAD longs (by 2.7K lots). There’s a dearth of Canadian data for the rest of the week, leaving focus more on energy prices and the greenback instead.
AUDUSD: Top performer amongst the FX majors
The Australian dollar outperformed yesterday alongside other commodity currencies, in a fundamental risk-on move that aided the pair’s commodity, proxy, and high-beta underlying. That has put another dent in its current bear trend technical overview that continues to stall at the lows, and whereby most of its technical indicators are still negative and combined with a trending ADX. This morning’s Chinese industrial data disappointed, with retail below expectations as well, while Australian data managed to beat expectations with a more positive consumer sentiment from Westpac’s reading and improved wage growth ahead of employment figures tomorrow. Retail and institutional bias remain at opposite ends, with the latter reducing that heavy short bias to 70% on a larger increase in AUD shorts by 8.9K lots than AUD longs by 6.9K lots
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