Asia AM Digest: Australian Dollar Faces CPI Amidst Stronger USD

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Current Market Developments – Alphabet Earnings, Poloz Speech

Towards the end of Monday’s session, Google’s parent company Alphabet reported first quarter earnings after US market close. EPS and revenue ex-TAC beat estimates. Meanwhile, Bank of Governor Stephen Poloz testified to the Finance Committee. He reiterated that the central bank will remain cautious on rates. Mr. Poloz also said that higher inflation will be due to temporary factors.

A Look Ahead – All Eyes on Australia CPI

Ahead, a top tier event risk during Tuesday’s Asia session will be Australia’s first quarter CPI report. Data out of the country has been tending to underperform as of late and this opens the door for a downside surprise. If such an outcome continues to lower the urgency for the Reserve Bank of Australia to raise rates, then we may see some Australian Dollar weakness.

I will be covering the Australia CPI report and AUD/USD’s response live. To join this session, click here

Prior Session Recap – US Dollar Continues Gaining

The US Dollar resumed its advance and climbed to its highest point in about three months, echoing gains seen during the end of last week. It appeared to be also for similar reasons, US 10-year bond yields rose to the highest in four years. This hinted at more firming hawkish Fed monetary policy expectations.

Meanwhile, Wall Street finished the day generally mixed, with the NASDAQ Composite down about 0.25%. The indexes were once again partially weighed down by the information technology sector. Sentiment-linked currencies like the Australian and New Zealand Dollars depreciated.

The anti-risk Japanese Yen however succumbed to selling pressure. It was depreciating during the middle of the session as the Nikkei 225 futures rose. It probably also didn’t help that it was fighting against a stronger US Dollar.

ASEAN bloc currencies like the Singapore Dollar and Indonesia Rupiahcame under pressure as expected. The former had to deal with a weaker-than-expected local inflation report amidst a more hawkish MAS (Monetary Authority of Singapore).

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IG Client Sentiment Index Chart of the Day: AUD/USD

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Retail trader data shows 63.5% of AUD/USD traders are net-long with the ratio of traders long to short at 1.74 to 1. The number of traders net-long is 16.0% higher than yesterday and 33.4% higher from last week, while the number of traders net-short is 8.7% higher than yesterday and 24.1% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests AUD/USD prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger AUD/USD-bearish contrarian trading bias.

Five Things Traders are Reading:

  1. Last Time This Happened in EURUSD was 1 Year Ago by Tyler Yell, CEWA-M, Head Forex Trading Instructor
  2. FX Markets Eye ECB and BOJ Meetings, Q1’18 UK and US GDP by Christopher Vecchio, Sr. Currency Strategist
  3. FX Overbought/ Oversold Report: Panic at the USD Short Trade by Tyler Yell, CEWA-M, Head Forex Trading Instructor
  4. USD/JPY Gaps Ahead of BoJ Meeting as U.S. Considers Trip to China by David Song, Currency Analyst
  5. Business Orders Soar Along With Price Pressures, But Employment Growth Fell Flatby Dylan Jusino, DailyFX Research

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— Written by Daniel Dubrovsky, Junior Currency Analyst for

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