JPY Surges on Equity Rout, GBP Leaps on Custom Union Report – US Market Open

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MARKET DEVELOPMENT – GBP JUMPS ON CUSTOM UNION REPORT

GBP: The Pound jumped through 1.3000 to hit highs of 1.3044 following UK press reports that the EU may offer a UK-wide custom union as a way around the Irish backstop issue, but it would have to be negotiated beyond the Withdrawal Agreement as a separate treaty. Consequently, this has provided a slight boost to Brexit optimism, however, as has usually been the case in recent weeks, optimism has typically been faded.

JPY: US equity futures are firmly in the red with the Dow Jones shedding over 400 points following the negative sentiment in European and Asian equity markets. In turn, the Japanese Yen has benefitted from safe haven flow with the currency eying 112.00 to the downside against the US Dollar.

EUR: Italian budget concerns persist with the European commission announcing that the Italian government will have to resubmit their budget. The Euro had been relatively unchanged following these comments, despite the uptick in Italian bond yields.

DailyFX Economic Calendar: Tuesday, October 23, 2018 – North American Releases

JPY Surges on Equity Rout, GBP Leaps on Custom Union Report - US Market Open

DailyFX Webinar Calendar:Tuesday, October 23, 2018

JPY Surges on Equity Rout, GBP Leaps on Custom Union Report - US Market Open

IG Client Sentiment: USDJPY Chart of the Day

JPY Surges on Equity Rout, GBP Leaps on Custom Union Report - US Market Open

USDJPY: Data shows 53.4% of traders are net-long with the ratio of traders long to short at 1.15 to 1. In fact, traders have remained net-long since Oct 15 when USDJPY traded near 112.308; price has moved 0.2% higher since then. The number of traders net-long is 11.6% higher than yesterday and 10.3% higher from last week, while the number of traders net-short is 15.7% higher than yesterday and 6.7% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USDJPY prices may continue to fall. Positioning is less net-long than yesterday but more net-long from last week. The combination of current sentiment and recent changes gives us a further mixed USDJPY trading bias.

Five Things Traders are Reading

  1. “DXY Index Advance Checked by Early-October High” by Christopher Vecchio, CFA , Sr. Currency Strategist
  2. “Technical Outlook for EUR/USD, USD/JPY, NZD/JPY, Gold Price & More”by Paul Robinson , Market Analyst
  3. “How does a leadership challenge to a UK Prime Minister work?”by Justin McQueen, Market Analyst
  4. “US Dollar (DXY) Touching a Two-Month High” by Nick Cawley, Market Analyst
  5. “Italian Bond Yields Lower But Euro Remains Weak” by Nick Cawley, Market Analyst

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