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The US Dollar is on pace to finish out its best week of the year following the European Central Bank’s meeting yesterday. By noting that the exchange rate could pose a downside risk to the region’s fragile recovery, the ECB effectively put a ceiling above the Euro. With US Treasury yields continuing to march higher, conditions are primed for a EUR/USD turn lower. The end of the month and beginning of the new one should bring about fireworks, with the Federal Reserve and the Bank of England set to meet on Wednesday and Thursday respectively, while the October US Nonfarm Payrolls report will come out on Friday.
DailyFX Economic Calendar: Friday, October 27, 2017 – North American Releases
Third quarter US GDP came in above expectations, quelling concerns that Hurricanes Harvey, Irma, and Nate would have a materially negative impact on growth last quarter. The resilient GDP reading underscores the likelihood that the Federal Reserve will raise rates again this year, with Fed funds now pricing in upwards of a 92% of a hike by December. Later today, the final UofM Confidence reading for October will be released; but as a ‘soft’ (rather than ‘hard’) data print, FX markets are likely to ignore the figures.
DailyFX Webinar Calendar: Monday, October 30, 2017
IG Client Sentiment Index Chart of the Day: USDJPY
Learn more about the IG Client Sentiment Index on the DailyFX Sentiment page
USDJPY: Retail trader data shows 48.1% of traders are net-long with the ratio of traders short to long at 1.08 to 1. The number of traders net-long is 3.9% higher than yesterday and 5.2% higher from last week, while the number of traders net-short is 3.2% higher than yesterday and 5.7% higher from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USDJPY prices may continue to rise. Positioning is less net-short than yesterday but more net-short from last week. The combination of current sentiment and recent changes gives us a further mixed USDJPY trading bias.
Five Things Traders are Reading
- “US Dollar Strength Comes Roaring Back: FOMC, NFP Next Week” by James Stanley, Currency Strategist
- “US Economy Grows by 3% in 3Q Largely Surpassing Estimates” by Dylan Jusino, DailyFX Research
- “DXY Bottoming, EUR/USD Topping Patterns Point to USD Strength” by Christopher Vecchio, CFA, Senior Currency Strategist
- “EUR/GBP Technical Analysis: Range Floor Gives Way After ECB” by Ilya Spivak, Senior Currency Strategist
- “EUR/USD Technical Analysis: Major Trend Reversal Hinted Ahead” by Ilya Spivak, Senior Currency Strategist
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