US dollar

Short term outlook
Bullish
Medium term outlook
Bullish
DAILY UPDATEThe US dollar is selling off today. The buck is currently weakening against all major currencies. Yesterday, the dollar strengthened at the outset of the day, but ended the day lower. Looking at EUR/USD, the pair found support just below 1.1750 and is currently trading above 1.180. EUR/USD has been selling off sharply since mid-April.  Following significant strength in recent history, the US dollar is currently taking a breather. Following two weak sessions, the buck is no longer looking overbought. In the longer-term, the ongoing themes of accelerating inflation and the relative outperformance of the US economy means that the dollar is likely to keep strengthening. Rising inflation is...

Euro

Short term outlook
Bearish
Medium term outlook
Bearish
DAILY UPDATEThe euro is currently strengthening against most major currencies. The common currency is the strongest against the US dollar and the Japanese yen. Yesterday, the euro weakened during Asian trading hours, but reversed course later in the day.  Looking at the euro more broadly, foreign exchange traders are closely watching developments in Eurozone bond markets. Yesterday, Italian government bonds sold off sharply (i.e. bond yields rose) as investors reacted to the new government's agenda. On the other hand, German government bonds strengthened as speculators sought safe haven assets. The spread between Italian 10-year government bonds and comparable German bonds rose to 1.85% yesterday,...

British pound

Short term outlook
Bearish
Medium term outlook
Bearish
DAILY UPDATEPound sterling is currently strengthening against all major currencies. The pound is currently the strongest against the US dollar and the Japanese yen. Yesterday, the pound weakened against both the euro and the US dollar. Today, the currency is tracking the euro higher as fears relating to the new Italian government take a backseat.  Turning to recent Brexit-related news, Prime Minister Theresa May has said that an Irish backstop would only apply for a limited period of time following Brexit. This follows comments from Boris Johnson, who said that Brexit supporters need not worry about a "betrayal". According to the  BBC, senior ministers have agreed to the backstop proposal. The bac...

Japanese yen

Short term outlook
Bearish
Medium term outlook
Bearish
DAILY UPDATEThe Japanese yen is mostly unchanged today. The yen is slightly weaker against the euro, British pound and Australian dollar and slightly higher against the US dollar and the Canadian dollar. Yesterday, the yen weakened against most major currencies, and especially against the euro and the Canadian dollar. After entering oversold conditions, the currency looks ripe for a short-term bounce.  There are no significant developments directly relating to the yen today. While major government bond yields and equity markets are rising, the yen is mostly flat. After selling off sharply since late March, the yen is now looking oversold. The current environment of relatively strong US economic gr...

Australian dollar

Short term outlook
Neutral
Medium term outlook
Bearish
DAILY UPDATEThe Australian dollar is currently mixed. The Aussie is higher against the US dollar, Japanese yen and Canadian dollar, while trading sideways against the euro and the British pound. Yesterday, AUD/USD made significant gains as the pair rebounded from oversold conditions. The Australian dollar was also sharply higher against the British pound and the Japanese yen.  There are few notable developments directly influencing the Australian dollar today. Instead, the currency is benefiting from weakness in the US dollar. As the US dollar weakens from overbought conditions, assets inversely related to USD are doing well. For example, China-sensitive commodities including copper and industrial...

Canadian dollar

Short term outlook
Neutral
Medium term outlook
Bearish
DAILY UPDATEThe Canadian dollar is currently strengthening against all major currencies. The loonie is the strongest against the euro and the US dollar. Yesterday, the loonie rallied alongside rising crude oil prices. The US dollar is correcting after moving into overbought conditions earlier this week.  Turning to the latest NAFTA developments, U.S. Treasury Secretary Steven Mnuchin said that "“There are still some very significant, open issues,” relating to the discussions. He added that one way to bypass Congressional approval was to get Trump to approve a "skinny deal". While Mexican officials claim that the remaining issues can be worked out, US Trade Representative Robert Lighthizer said tha...

Gold

Short term outlook
Bearish
Medium term outlook
Bearish
DAILY UPDATEGold prices are currently slightly higher. Yesterday, the precious metal sold off sharply at the outset of the day thanks to US dollar strength. As the dollar reversed course later in the day, gold prices moved up accordingly. US bond yields ended the day flat yesterday. As a result of limited moves in both the dollar and in yields, gold ended the day flat.  Today, gold prices remain fairly stable. The US dollar is weakening as the currency pulls back from overbought conditions. While the dollar remains in a bullish trend, recent strength in the currency was excessive. Turning to interest rates, bond yields are rising thanks to higher crude oil prices. WTI jumped above $72/barrel yeste...

Crude oil

Short term outlook
Bullish
Medium term outlook
Bullish
DAILY UPDATECrude oil prices are currently flat - both Brent and WTI are currently trading sideways. Yesterday, both benchmarks moved up sharply. Now that crude oil is no longer looking overbought, the commodity can keep strengthening without running into significant resistance over the coming days.  While there are few notable developments today, the combination of supply concerns and still-strong demand means that crude oil prices are likely to keep rising. Supply remains a concern as falling South American production (led to by declines in Venezuela) means that the continent may need to import crude oil in the near future. The continent has historically exported a large portion of its crude oil...

In this week’s Commitments of Trader’s Report, speculators continue to sell assets inversely correlated to the US dollar. The biggest changes can be seen in falling speculator net positions in the Australian dollar, the Swiss franc, and gold. Net positions in other assets inversely correlated to the dollar including the euro, the British pound, the Canadian dollar and crude oil are also lower thi…

Published 

In our last take on the outlook for gold, we wrote that the combination of slowing growth outside the United States and rising inflation meant more weakness lay in store for the precious metal. When both US growth and inflation are high, the Fed is more likely to raise rates with the aid of supportive data. In an environment where US growth is outperforming its major peers, the US dollar also ten…

Published 
Tags: Gold

Looking at this week’s Commitments of Traders Report, speculators are selling inflation-sensitive currencies including the Japanese yen and the Swiss franc. The British pound remains out of favor following both poor economic data and weak guidance from the Bank of England. Finally, speculators also dumped positions in the Australian dollar, thanks to ongoing US-China trade tensions. The net resul…

Published 

In our last commentary on the Japanese yen, we wrote that the currency was looking excessively weak against the euro. In particular, we stated that bullish catalysts driving EUR/JPY were at risk as speculator positioning in both long euro and short yen trades were looking extreme. In addition, we flagged changes to the Bank of Japan’s “yield curve control” program as a potential risk for yen stre…

Published 
Tags: Japanese yen

In our previous analysis on the pound, we claimed that the number of catalysts driving the currency’s bullish trend were running out. At the time, we warned that the rally was running out of momentum, but did not see any evidence that would suggest adopting a bearish stance. Following recent weakness in the British pound, we downgraded our longer-term outlook on the currency to bearish on April 2…

Published 

In this week’s Commitments of Traders Report, speculators continue to sell positions inversely correlated to the US dollar. As a proportion of total interest, the most meaningful declines this week were in Swiss franc, British pound, and gold net positions. Other assets such as the euro, Canadian dollar, Australian dollar and crude oil also suffered from falling net speculator positions. As a res…

Published 

In our previous commentary on the US dollar, we warned that a weak dollar was hiding significant risks in growth-sensitive assets such as equities and European currencies. As the world’s reserve currency, the buck is inversely correlated to most financial assets because most cross-border lending is conducted in dollars. Thanks to a slowdown in economic growth outside the United States coupled wit…

Published 
Tags: US dollar

This week’s Commitments of Traders Report includes quite a few meaningful changes in speculator positions in major currencies and commodities. In recent history, changes have been fairly insignificant. Specifically, net positions in the euro, the British pound and gold are all down this week. On the flip side, net positions are higher in commodity currencies such as the Australian dollar and the …

Published 

In our previous take on the Australian dollar in late February, we wrote that falling commodity prices, an ongoing slowdown in China, and weak domestic conditions (looking at both economic data and monetary policy expectations) were significant headwinds for the currency. Beyond economic indicators, quantitative signals also suggested that the bullish trend was running out of steam. We downgraded…

Published 

Last week, we wrote that weakness in the US dollar is masking growing risks. As equities, commodities and corporate credit are inversely correlated to USD, investors need to pay attention to the risk of a US dollar rebound. Since early 2017, gold prices have gradually strengthened. As the precious metal serves as a barometer for US dollar liquidity, the clear message from gold was that monetar…

Published 
Tags: Gold

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