Last week's +0.3% GDP figure in the UK was enough to make the pound the top performer last week in a sure sign of stagnant global growth. Then Friday's US growth figure missed by a half-point and dashed the near-term hopes of the USD/JPY bulls. This week opens a day later than usual in Japan as Golden Week holidays begin.
The first quarter GDP report from the US was a disappointment with annualized growth at 2.5% compared to the 3.0% consensus. Consumer spending was unexpectedly strong but it wasn't enough to overshadow the drag from trade and inventory drawdowns.
USD/JPY fell immediately and continued to drop until stalling just ahead of the 21-day moving average at 97.55.
The week ahead could be unpredictable for yen crosses with Japanese desks understaffed. A portion of Friday's decline in USD/JPY was probably on position squaring ahead of the holidays. There is a line of thinking that Japanese firms will begin to re-allocate asset weightings offshore following the holidays. At some point this week, we could see traders buying USD/JPY to front run that move.
Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.
EUR -34K vs -30K prior
JPY -80K vs -93K prior
GBP -60K vs -62K prior
AUD +31K vs +53K prior
CAD -72K vs -76K prior
NZD +28K vs +31K prior
CHF +1K vs -3K prior
US Dollar Index longs at 38K vs 50K prior
For the second week in a row, AUD traders backed out of long positions. Signs of a slowdown in China and the potential for an RBA rate cut are concerns but even with the large shift in positions, the Australian dollar hasn't weekend much since April 14.
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