Forex Market Sentiment: Week of March 7, 2023

Another week of US dollar strength coincided with an increase in long positions among IG clients for GBP/USD and AUD/USD. Though USD is not as strong as it was during 2022's peak for the currency, it is edging closer to those levels in AUD/USD and USD/CAD in particular. IG clients seem to be playing the contrarian as the majority of them are on the short side of the dollar in most major pairs.

Client Sentiment shows the percentage of IG client accounts with open positions that are currently long or short. If the majority of client accounts with open positions are long a given market, then they expect the price to rise; if the majority is short, then they expect it to fall. (Values taken using IG's Client Sentiment measure as of the previous day's close.)

EUR/USD – 57% Long

Last week’s sentiment: 63% Long

Though the US dollar has strengthened against most major counterparts in the last week, the euro has been one of the non-USD bright spots - holding relatively flat against USD and increasing against other currencies like GBP and AUD. In this time, longs decreased among IG clients from 63% to 57%.

GBP/USD – 66% Long

Last week’s sentiment: 64% Long

In the grand scheme of things, pounds traded about unchanged over the last week; however, GBP lost some ground to USD and EUR amd edged closer to extreme levels seen in 2022. IG clients went from 64% to 66% long in this declining pair.

USD/JPY – 59% Short

Last week’s sentiment: 63% Short

Yen traded mostly unchanged in the last week as Thursday's Bank of Japan meeting looms with its expected decision on Japanese interest rates. In the leadup to this event, IG clients reduced their short USD/JPY overall positions from 63% to 59%.

AUD/USD – 77% Long

Last week’s sentiment: 73% Long

Australian dollars made year-to-date lows in recent trade falling well below 0.66, which coincided with an increase in long positions among IG clients from 73% to 77%. The Reserve Bank of Australia hiked interest rates by the expected amount, and, given the response in AUD versus USD, EUR, and more, the market might have wanted a greater hike.

USD/CAD – 71% Short

Last week’s sentiment: 73% Short

Along with the Aussie, Canadian dollars depreciated substantially against those in the US. USD/CAD rose to new highs year-to-date getting above 1.37 in recent trade. Though prices got more extreme amid the US dollar bull run, short USD/CAD positions lessened slightly among IG clients from 73% to 71%.