USD/CHF and USD/JPY plummet as investors flee to safety
Safe haven in demand sends yen, franc, and euro higher while aussie and greenback plummet.
EUR/USD: A (rare) safe haven beneficiary of Friday’s trade war shock
Safe haven products outperformed on Friday, and while the euro isn’t always in that group, the worsening trade war between the US and China made it the third-best performer after the franc and yen and upsetting its negative technicals (including a bear trend on the daily) in the process. On the weekly chart, its bear trend channel is still intact however, with its price close to the lows and fears that the European Union could be next in the application of tariffs on goods imported into the US clearly not unfounded. The gains on Friday certainly helped retail longs initiated at the lows take profit, and bias week-on-week has dropped 6% to a (still) majority long 61%. The latest CoT figures show a reduction in euro longs by 1.8K lots and a larger reduction in euro shorts by 7.4K lots failing to tip the balance in what is still a majority short 56% bias.
GBP/USD: Not outperforming but able to finish higher against the US dollar
With USD in retreat against most of the FX majors, the pound was able to register a second consecutive day of gains against it, taking its price above its main daily short-term moving averages. However, its bear trend line on both the daily and weekly chart is still holding, and still below its main long-term moving averages. Keep in mind that Friday’s slight reversal wasn’t on the back of pound strength but USD weakness given a worsening trade war, and hence if the greenback manages to regain its footing would put recent gains at risk of a reversal. In Brexit news, Sky News reported that UK PM Johnson would tell European Council head Tusk that the UK would only pay 9 bn pounds instead of the originally agreed upon 39 bn. In terms of sentiment, retail bias dropped 4% on long profit-taking, while institutional bias is unchanged at an extreme short 79% despite a reduction in shorts by 3.4K lots.
USD/JPY: Risk-off event aids safe haven yen and keeps the pair’s negative technicals intact
While the technical bias for this pair remains negative on both the daily (with a stalling bear trend technical overview) and weekly (consolidatory but with heavy negative bias), the catalyst has clearly been fundamental and down to the risk-off moves in the financial markets as the US-China trade war worsens. Furthermore, in the absence of significant fundamental events that pertain to risk, the intraday movement has been relatively sedate and consolidatory, offering few breakout (or reversal) opportunities. Both franc and yen outperformed on Friday, though consistent negative news would be needed to keep that momentum going. The downside movement has enticed retail shorts into taking profit, and as a result heavy long bias has risen by 7% at the end of last week alone, with institutional bias an opposite heavy short 73% anticipating further risk-off events and reducing yen short positions by 8.2K lots in the process.
USD/CAD: Consolidatory moves befitting its weekly (and daily) consolidatory outlook
Canadian retail figures on Friday were better than expected and avoided the expected contraction. However, a trade war taking a turn for the worse between the US and China sent oil prices plummeting on an expected weakness in demand and took CAD’s energy underlying with it. With the greenback underperforming heavily, USD/CAD suffered a modest price drop, and continues to experience consolidatory moves that are befitting its weekly (and daily) consolidatory outlook. Canadian GDP will be released later this week, as will preliminary US GDP figures on Friday. But overall, attention for this pair may depend on the trade war. Retail bias is still majority short, but profit-taking on shorts initiated at the highs has dropped that bias slightly. Institutional bias is unchanged at a majority short 58% with both CAD longs and shorts suffering reductions, to the tune of 2.7K lots and 1.5K lots respectively.
AUD/USD: Commodity and proxy currency gets hit with worsening US-China trade war
The pair’s technicals were already bearish to begin with, but fundamental news in the form of a worsening trade war and recessionary risks that have failed to subside sent the commodity and proxy currency lower, underperforming on Friday against the remaining FX majors. But the greenback wasn’t that far off as the second-worst performer, and hence the damage was relatively limiting for this pair’s price drop, suffering its fifth consecutive week of decline. China’s yuan weakened on Friday as well, registering its eighth consecutive day of decline against an already battered greenback and likely to dent demand for commodities. In terms of sentiment, retail bias has risen 5% to an extreme long 79% and squeezed by recent moves, while institutional bias is a couple percent higher at a heavy short 75% on similar 4K lot reductions in both AUD longs and shorts.
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