Strategy Video: AUD/USD and AUD/JPY Stand at Critical Support Ahead of RBA
Talking Points:
• The RBA rate decision is this week's top, scheduled monetary policy event
• Market-derived swaps show a 75 percent probability of a 25bp cut, but Economists are far less convinced
• At the last RBA cut (February 3), there was a notable lack of follow through on AUD selling
Heavily One-Sided Sentiment Points to British Pound Weakness
Today is Thursday which means quantitative strategist David Rodriguez just released his weekly analysis of the Speculative Sentiment Index (SSI) on DailyFX.com: "Retail forex traders continue buying aggressively into British Pound weakness, and a contrarian view of crowd sentiment leaves us watching for further weakness.
Past performance is not necessarily indicative of future results.
"The ratio of long to short positions in the GBP/USD stands at 2.32 as 70% of traders are long. Yesterday the ratio was 1.03; 51% of open positions were long. Long positions are 59.8% higher than yesterday and 48.1% above levels seen last week. Short positions are 28.8% lower than yesterday and 11.4% below levels seen last week.
Past performance is not necessarily indicative of future results.
"We use our SSI as a contrarian indicator to price action, and the fact that the majority of traders are long gives signal that the GBP/USD may continue lower. The trading crowd has grown further net-long from yesterday and last week. The combination of current sentiment and recent changes gives a further bearish trading bias."
Senior Technical Strategist Jamie Saettele posted the following daily chart of the Dow Jones-FXCM Dollar Index (ticker: USDOLLAR).
Past performance is not necessarily indicative of future results.
"USDOLLAR continues to respect well-defined parallels. A drop below the lower parallel would indicate an important behavior change and potential for the largest decline since July 2014. At the same time, the median line could provide resistance near 12220."
Major Shift in Forex Trader Behavior Points to US Dollar Weakness
In his weekly update of the the Speculative Sentiment Index (SSI) posted today on DailyFX.com, quantitative strategist David Rodriguez had this to say: "An aggressive shift towards crowd buying leaves us firmly in favor of continued US Dollar weakness—particularly versus the Euro, Sterling, and New Zealand Dollar.
Past performance is not necessarily indicative of future results.
"The ratio of long to short positions in the GBP/USD stands at -1.44 as 41% of traders are long. Yesterday the ratio was 1.07; 52% of open positions were long. Long positions are 2.4% lower than yesterday and 45.4% below levels seen last week. Short positions are 49.8% higher than yesterday and 138.7% above levels seen last week.
Past performance is not necessarily indicative of future results.
"We use our SSI as a contrarian indicator to price action, and the fact that the majority of traders are short gives signal that the GBPUSD may continue higher. The trading crowd has flipped from net-long to net-short from yesterday and last week. The combination of current sentiment and recent changes gives a further bullish trading bias."
Gold Prices May Be Topping, S&P 500 Locked in Trading Range
Below are highlights from DailyFX.com strategist Ilya Spivak's Cross-Market Technical Update:
GOLD (XAU/USD) TECHNICAL ANALYSIS - Prices may be carving out a bearish Head and Shoulders top chart pattern.
Past performance is not necessarily indicative of future results.
Confirmation is required on a daily close below 1185.23, the 23.6% Fibonacci expansion, with the first downside target thereafter coming in the 38.2% level (1161.16). Near-term resistance is at 1224.15, the April 6 high.
S&P 500 (SPX500) TECHNICAL ANALYSIS – Prices continue to hover below resistance in the 2111.00-19.40 area (23.6% Fibonacci expansion, February 25 high).
Past performance is not necessarily indicative of future results.
A break above that on a daily closing basis exposing the 38.2% level at 2154.90. Alternatively, a reversal below the 14.6% Fib at 2084.00 targets the March 12 low at 2040.10.
What are the Critical Dates for Greece and the Euro?
Greek negotiations with the Euro Working Group (EWG) and the International Monetary Fund remain a key risk to markets as a Greek default would likely force substantial market volatility and force it out of the Euro Zone. But what are truly key deadlines for the at-risk Hellenic government and broader markets?
Quantitative strategist David Rodriguez highlights some of the critical dates to watch in the weeks and months ahead.
Great risk surrounds Greek repayment of debt, potentially leading to exit of Euro Zone
Critical dates ahead lead volatility prices/expectations significantly higher
Important to monitor Euro volatility risk and adjust positions accordingly
What's the most important date on the calendar? David Rodriguez discusses this in his article on DailyFX.com
COT: Crude Oil Small Traders Flip to Net Long Position
The Commitments of Traders (COT) Index is the difference between net speculative positioning and net commercial positioning measured. The latest data show that small non-commercial traders have flipped to being net long crude oil.
Past performance is not necessarily indicative of future results.
Non-commercials tend to be on the wrong side at the turn, and commercials the correct side. Use of the index is covered in more detail by senior technical strategist Jamie Saettele in his article on DailyFX.com
DailyFX currency strategist Michael Boutros tweeted this chart of the Dow Jones-FXCM Dollar Index (ticker: USDOLLAR) which has posted its 5th consecutive day of declines:
Past performance is not necessarily indicative of future results.
He is "looking at 10,809/15" as a target for the USDOLLAR. To get his latest trading ideas and charts, you can follow Michael Boutros on Twitter @MBForex
Video: Dollar Fundamental Bearing Black-and-White or Shades of Grey?
In today's strategy video, DailyFX chief currency strategist John Kicklighter looks at the difference between 'black-and-white' developments and those that are more appropriately termed 'shades of grey' with reference to today's US GDP release and the FOMC rate decision.
Talking Points:
• Event risk can offer a clear surprise and impact on the market or it can blur the market's view
• Wednesday, US GDP signaled a distinct view for the masses while the FOMC further stirred debate on hikes
• Both technicals and fundamentals can drive market moves or destabilize them
Video: Heavy Speculation of a Rate Cut Marks RBA Decision as Volatility Event
Talking Points:
• According to swaps, the market is pricing in a 75 percent probability of an RBA 25bp rate cut Tuesday
• The same level of confidence for a rate cut was priced in for February's move, but the reaction surprised
• Given the market expectations, the more surprising and likely impactful move would come with no change
EUR/JPY New Trend - FX Sentiment & Volume Analysis
Forex trading instructor Tyler Yell said in his trading lesson today on DailyFX.com that "FXCM Trading Volume on the EUR/JPY has seen an abrupt turn as price broke through resistance after a series of lower highs and lower lows. With SSI showing a greater than 2:1 ratio of short-interest, sentiment traders are favoring upside.
EUR/JPY Turns Focus On Prior Resistance to Validate Upside
Past performance is not necessarily indicative of future results.
"Over the last month, the three largest volume days or associated on up days from the 126.08 low recorded on April 14, 2015. The price action and volume picture helps to paint a picture of just how bullish the EUR/JPY may be coming.
EUR/JPY SSI Hits 12-Month Lows
Past performance is not necessarily indicative of future results.
"The inverse relationship that SSI has with price might point us towards a higher EURJPY. 68% of retail traders are short. An SSI value of -2.08 is the lowest SSI value we have seen since the December 2014 high."
