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Sentiment Falls Before G7, NK Summit. Yen May Gain

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Current Developments – Sentiment Falls Apart At the Last Minute

Risk appetite fell apart towards the end of Thursday’s trading session as comments from the White House appeared to have spooked the markets. US President Donald Trump, ahead of his summit with North Korean Leader Kim Jong Un, said that there will be no deal if the country does not give up its nuclear program. Back in May, a top defector from North Korea said that the country would never completely give it up.

In addition, the markets are also heading into what could be a heated G-7 leaders summit on Friday and into the weekend. Last week, Mr. Trump went ahead with imposing metal tariffs on Canada, Mexico and the European Union. Ahead of the meeting, French President Emmanuel Macron urged others to stand up to the American president. With that in mind, it is not surprising to see the markets turn to safety in preparation.

US bond yields tumbled and prices rose as demand rose for havens. At a quick glance, Wall Street appeared finish the day rather mixed with the Dow Jones up 0.38%. The S&P 500 on the other hand was 0.07% lower. This was mainly due to gaps higher at market open which helped to keep some of the indexes in the green by the end of the day.

The anti-risk Japanese Yen and Swiss Franc were some of the best performing majors with USD/JPY putting in its largest daily decline since May 29. Meanwhile, the sentiment-linked Australian and New Zealand Dollars underperformed. The former was also hurt by a weaker-than-expected local trade balance report earlier in the session.

The Canadian Dollar experienced a rather choppy session, also finishing cautiously lower. Though comments from Bank of Canada’s Governor Stephon Poloz helped to give the commodity currency some relief. Mr. Poloz that that they see solid economic expansion ahead. He added that at their next rate decision in July, they will incorporate tariff impacts into their outlook.

A Look Ahead – Japanese Yen May Gain

A lack of critical economic data during Friday’s Asian session will probably allow risk trends to continue brewing. If stocks follow Wall Street lower, then the Japanese Yen could gain at the expense of sentiment-linked currencies like the New Zealand Dollar. Meanwhile, at an unspecified time today, we will get Chinese trade balance data which may have a knock-on effect on the Australian Dollar.

DailyFX Economic Calendar: Asia Pacific (all times in GMT)

Asia AM Digest: Sentiment Falls Before G7, NK Summit. Yen May Gain

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Asia AM Digest: Sentiment Falls Before G7, NK Summit. Yen May Gain

IG Client Sentiment Index Chart of the Day: USD/JPY

Asia AM Digest: Sentiment Falls Before G7, NK Summit. Yen May Gain

CLICK HERE to learn more about the IG Client Sentiment Index

Retail trader data shows 49.1% of USD/JPY traders are net-long with the ratio of traders short to long at 1.04 to 1. The number of traders net-long is 3.6% lower than yesterday and 2.3% lower from last week, while the number of traders net-short is 13.6% higher than yesterday and 27.3% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USD/JPY prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger USD/JPY-bullish contrarian trading bias.

Five Things Traders are Reading:

  1. Dollar-Yen Rate Snaps Bullish Sequence Ahead of May-High by David Song, Currency Analyst
  2. USD/JPY Technical Outlook: Decision Time for the Japanese Yen by Michael Boutros, Currency Strategist
  3. Dow Jones: Bullish Break of Wedge on Way to Fresh Two-Month Highs by James Stanley, Currency Strategist
  4. AUD/USD Forecast: Higher-Lows to Keep Trendline Resistance on Radar by David Song, Currency Analyst
  5. EUR/USD Squeezed as Euro Recovers, but Can it Become Something More? by James Stanley, Currency Strategist

— Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter



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Forex

Bitcoin Net-Longs Slide Into 1-Month Lows

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Bitcoin Client Positioning

Bitcoin Net-Shorts 5.2% Higher Since Last Week

Bitcoin: Retail trader data shows 76.8% of traders are net-long with the ratio of traders long to short at 3.3 to 1. The number of traders net-long is 1.1% lower than yesterday and 8.0% lower from last week, while the number of traders net-short is 0.5% lower than yesterday and 5.2% higher from last week.

Be sure to check out our Bitcoin Trading Guide if you’re new to cryptocurrencies!

Bitcoin Net-Long Dip Indicate Bullish Bias

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Bitcoin prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current Bitcoin price trend may soon reverse higher despite the fact traders remain net-long.

— Written by Yayati Tanwar, DailyFX Research



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Canadian Dollar (CAD) Eyes Latest Inflation Report

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Canadian Dollar Price, News and Analysis

  • Inflation expected unchanged, but any uptick could seal another rate hike in October.
  • Canadian economy continues to grow strongly.

IG Client Sentimentshows retail are 46.3% net-long of USDCADa bullish contrarian sentiment indicator.

Canadian Dollar May Receive a Boost on Latest Inflation Report

The Canadian dollar is currently treading water ahead of the July CPI report with the market expecting a 0.1% month-on-month rise and a 2.5% annualized reading, both unchanged from last month’s strong report. Canadian CPI grew at its fastest rate in over six years in June, due to higher energy prices, and another strong reading today will increase pressure on the Bank of Canada to hike rates again, probably at the October meeting. The central bank has already hiked rates by 0.25% twice this year and by a total of four times in the last 12 months. Last week data showed Canadian unemployment falling to 5.8% from a prior 6% while employment grew by 54.1k against expectations of 17K and a prior month’s 31.8k.

USDCAD has remained in a 1.2950 – 1.3200 range over the last month, despite the strength of the US dollar and fears over the NAFTA negotiations. The pair currently trade at 1.3130, just above 23.6% Fibonacci support at 1.3118 and below the July 24 high at 1.3192. An inline or slightly stronger-than-expected reading would seal another 0.25% rate hike and see USDCAD break lower with the 38.2% Fibonacci retracement at 1.2952 the short-term target. A weaker-than-expected reading today would see the July 24 high under pressure.

We have recently released our Q3 Trading Forecasts for a wide range of Currencies and Commodities, including the Canadian Dollar.

USDCAD Daily Price Chart (January – August 17, 2018)

Canadian Dollar (CAD) Eyes Latest Inflation Report

DailyFX has a vast amount of updated resources to help traders make more informed decisions. These include a fully updated Economic Calendar, and a raft of Educational and Trading Guides

— Written by Nick Cawley, Analyst

To contact Nick, email him at nicholas.cawley@ig.com

Follow Nick on Twitter @nickcawley1



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USD/CNH & Gold Price Action Point to Reversals Gaining Traction

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Gold, USD/CNH Technical Highlights

  • Gold price reversal and sentiment supportive of a low
  • Correlation between Gold & CNH extremely high
  • USD/CNH reversing hard from near Dec ’16 peak

For an in-depth intermediate-term technical and fundamental outlook, check out the Q3 Gold Forecast.

Gold price reversal and sentiment supportive of a low

On Wednesday, we were discussing the oversold, overly bearish backdrop in gold, but that first we needed to see some type of swift flush and reverse or something of that nature before looking for a low. We didn’t have to wait long, as the past few sessions qualified as flush-and-reverse price behavior, with silver, unsurprisingly and in silver-like fashion, displaying even more capitulation-like behavior, shedding 3 of its 4% in an hour on Wednesday.

As long as gold & silver can hold onto yesterday’s lows on a closing basis, we’re looking for at least a rebound back to the point of origination of the most recent leg lower (~1210 & 15.30). If another leg lower develops we’ll have to reassess.

Check out the IG Client Sentiment to see how other traders are positioned and why it can be used as a contrarian indicator.

Gold Daily Chart (Flush & Reverse)

Gold daily chart, flush and reverse

Correlation between Gold & CNH extremely high

If gold is reversing then so is CNH and vice versa. Gold and CNH have a 3-month correlation of 97%. They are effectively the same market at this juncture. How one plays it is up to the instrument of choice, but be mindful of total risk if trading both.

Gold/CNH Daily Chart (97% 3-mo Correlation)

Gold/CNH daily chart (97% 3-mo correlation)

USD/CNH reversing hard from near Dec ’16 peak

USD/CNH is in the process of carving out a weekly key-reversal bar just shy of the December 2016 high, assuming it doesn’t post a big rally from here. Trade a little higher today or lower and the reversal currently in place will stand as confirmed.

The candle development along with a break in the upward channel on the daily time-frame should usher in more selling, and perhaps in swift fashion. Looking lower, there are minor levels along the way that were carved out as the channel matured, but the broader target is the bottom of the upward grind since last month, right around the 6.60 mark.

USD/CNH Weekly Chart (Key-reversal nearly complete)

USD/CNH weekly chart, key-reversal as long as no sizable rally ensues today

USD/CNH Daily Chart (Channel break to send it lower)

USD/CNH daily chart, channel break to send price lower

Resources for Forex & CFD Traders

Whether you are a new or experienced trader, we have several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.

—Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX



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