European currencies power higher as greenback weakens

Pound finishes the week at the top despite weekend Brexit snags, euro and franc both outperform.

EUR/USD: European majors finish the week heavy in the green, both retail and institutional bias at a majority short 60%

European majors won big last week following the UK-EU Brexit deal, with the fundamental news pushing the pair’s price higher and infusing it with more positive technical bias, breaking its weekly bear trend channel, and crossing above all its main short-term weekly moving averages (and above its 100-day moving average on Friday). There’s long-term negative bias to contend with, and the fact that there’s still internal UK politics to get the deal agreed upon, a retracement back down can’t be ruled out, and contrarian breakout strategies (including sell side in the event of negative news) may be more ideal as (or when) volatility hits. In sentiment, retail longs getting out and shorts initiating has pushed it further towards majority short territories, matching the 60% bias held by larger traders according to the latest Commitment of Traders (CoT) report on a reduction in both euro long and short positions.

GBP/USD: Pound tops the performance charts for the week as volatility spikes

The pound was the biggest winner last week and by a healthy margin, as Brexit-related headlines pushed its price above its 50-week moving average and enticed volatile breakout strategies over fading and reversals. The latest Brexit news is a potential delay, and headlines will likely continue to drive this pair’s price, with breakout strategies on any fresh news (be it to the upside or downside) conformist to its technical overview than contrarian reversals. It was a good week for retail longs, and the gains have aided them into taking profit and pushing majority long bias closer to the middle. As for larger speculative traders on the CFTC’s CoT report, they remain in extreme short territories as similar sizeable above 4,000 lot reductions in both pound long and short positioning have kept it largely unchanged.

USD/JPY: Both yen and dollar put in a dismal performance to end little changed against each other, CoT bias shifts

The US dollar was the worst performer last week, but with the yen a close second it failed to live up to volatility expectations, remaining relatively range-bound for the week instead. As a result, retail bias is little changed and remains close to the middle, but for institutional traders it’s a shift back to majority long for the first time since July, as investor expectations of ongoing ‘risk-off’ plays where they flee to the safe haven yen didn’t pan out as expected. The decrease in yen longs by 6,387 lots and a simultaneous increase in yen shorts by 11,266 lots has caused a 9% change in sentiment to a now slight majority long 53% (i.e. slight majority short yen).

USD/CAD: Finishing lower for the week as US dollar retreats, retail bias shifts

The Canadian dollar didn’t outperform against most of the majors but did finish higher against a battered US dollar. The pair’s price is now just above its 200-week moving average and is situated well below its main long-term daily moving averages as it begins to show more negative technical bias. Retail bias has shifted on the price plummet as shorts take profit, from a previous slight short 52% at the start of last week to a majority long 57% at the start of this week. Institutional bias is still majority short, rising to 56% thanks to an increase in CAD long positioning by 8,936 lots outdoing a smaller increase in shorts by only 1,288 lots. With employment and Consumer Price Index (CPI) figures out of the way, retail data is up next on Tuesday.

AUD/USD: Last Thursday’s stronger employment figures and Friday’s RBA Lowe comments give it a higher finish

With the greenback in retreat, the Australian dollar didn't need to outperform significantly in the FX market to finish significantly higher, especially with Thursday's stronger than expected Australian labor data giving it a boost, and aided by the Reserve Bank of Australia (RBA) governor Lowe’s comments regarding not assuming further rate cuts. The net result aided retail traders who at the start of last week were heavy long at 66% and have dropped 8% since to a more modest long 58% bias. Institutional bias on the other hand, hasn’t budged from last week’s heavy short 68% as small reductions in both AUD long and short positioning do little to change the percentage bias.


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