Safe haven yen outperforms for the week but the greenback’s not that far off
Week of central bank announcements ends with a Federal Reserve 0.25% rate cut and the rest on hold, Reserve Bank of New Zealand this Wednesday.
EUR/USD: Ending the week lower despite a 0.25% US Federal Reserve rate cut
Weekly movement was relatively range-bound despite central bank announcements last week that included the Federal Reserve's 0.25% rate cut. For the euro, it ended the week lower against a stronger greenback, and as a result keeping its weekly (and daily) technical overview showing ongoing negative bias with the pair's price beneath all its main moving averages. Thus far however, there's been a lack of follow through and hence giving less significant opportunity for breakout strategies. But according to the latest Commitment of Traders (CoT) report institutional traders continue to anticipate further downside bias, upping their majority short sentiment by 3% on a reduction in euro longs by 16,263 lots and increasing euro short positions by 2,454 lots. On the retail front, majority long bias is up by 9% as range-trading shorts get enticed into taking profit and longs hold on anticipating retracement back up.
GBP/USD: Relatively outperforming but failing to unseat the US dollar
It was a significant week for this pair, with the Fed's decision to reduce rates by 0.25% and the Bank of England (BoE) keeping its monetary policy on hold but citing ‘a further period of entrenched uncertainty’ due to political events and like to hit demand growth and ‘increasing excess supply’. Dovish on both fronts kept its movement relatively range-bound for the week and upsetting what was expected to be a volatile breakout movement in price. From a weekly technical standpoint, most of its indicators are neutral, its price is below all its main weekly long-term moving averages, its weekly bear trend line is holding, but with a positive Directional Movement Index (DMI) and far more positive short-term daily technicals. From an institutional standpoint, the bias has turned more bearish against the pound but only due to a reduction in pound longs by 16,571 lots that was less than the reduction in pound shorts by 22,680 lots.
USD/JPY: Yen finishes higher against the greenback to top the performance chart
The yen outperformed last week against the remaining FX majors, and with the US dollar not far off it wasn’t able to force a sell breakout strategy on the weekly, whereby expectations were for a volatile week with both the US Fed and the Bank of Japan (BoJ) announcing their respective monetary policies. As it stands, the former has opted for a 0.25% reduction while the latter has kept its rates unchanged at -0.1% and its pledge to keep Japanese 10-year government bonds around 0%. The BoJ also pointed out that momentum in achieving its 2% inflation target was losing ground, and hence hinting of further action at the next policy meeting. In terms of sentiment, retail bias was little changed at a majority long 54% as of this morning, while CoT bias is still majority short but down 5% thanks to a reduction in yen shorts by 5,737 lots and a simultaneous increase in yen longs by 2,992 lots.
USD/CAD: Finishing higher for the week but still down due to last weekend’s gap
Had it not been for last weekend’s gap higher in energy prices, the Canadian dollar’s (CAD) energy underlying wouldn’t have received a necessary boost that sent the pair’s price gapping lower at the start of last week. However, the US dollar managed to outperform afterwards to finish higher against the energy commodity currency, and as it stands most of the main technical indicators on both the weekly and daily level are neutral. Expected volatility in energy didn’t pan out as expected with mostly consolidatory moves towards the end of last week, and hence the outlook from a technical standpoint for this pair remained just that. But larger traders are anticipating a retracement in this pair’s price, as the latest CoT report shows bias in the loonie rising 4% on an increase in CAD longs by 7,033 lots and a reduction in CAD shorts by 1,267, as both retail and institutional majority short bias rises in USD/CAD.
AUD/USD: A week to forget for the Australian dollar as the pair’s price plummets back down
Just as positive technical bias was forming on the daily outlook for this pair, three consecutive days of decline last week undid that swiftly to take its price back below all its main daily moving averages, and back below all its main weekly moving averages. Daily positive bias has swiftly been eroded, and on the weekly its negative technical bias and bear trend channel continue to hold. In terms of bias, retail sentiment is up 9% since the start of last week as fresh shorts were quick to close out while longs hold on, and on the institutional front they’ve been scaling back AUD shorts by 15,360 lots as opposed to reducing AUD longs by only 2,378 lots, and as a result taking heavy short bias 3% lower to 68%. That’s in contrast to CoT bias in the New Zealand dollar, which rose 7% to an extreme short 77% as underlying demand between soft and hard commodities widen.
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