More Scope for High Energy Prices to Weaken Stocks and JPY, Benefit USD and AUD

Market sentiment evaluation:

  • Dealer confidence is affected by excessive vitality costs, fears of inflation and rising yields on US Treasuries.
  • As soon as the present interval of consolidation is over, these elements are more likely to reassert themselves.
  • In the meantime IG consumer positioning knowledge are sending out a bullish sign for GBP/JPY.

Dealer confidence nonetheless low

Dealer confidence stays low as excessive vitality costs, fears of inflation and rising sovereign bond yields spook buyers. For now, the markets are pausing for breath however these elements will probably re-emerge, hitting inventory costs and benefiting the safe-haven US Greenback.

For different currencies, the affect will probably be blended, with the Japanese Yen sinking because the Financial institution of Japan will likely be one of many final central banks to extend rates of interest, if it does in any respect, however the Australian Greenback more likely to profit from increased commodity costs and GBP from expectations of a rise in UK charges by year-end.

In opposition to this background, IG consumer sentiment knowledge are sending out a bullish sign on GBP/JPY after large will increase in net-short positions by retail merchants.

GBP/JPY Value Chart, Day by day Timeframe (Might 20 – October 12, 2021)

Latest GBP/JPY price chart.

Chart by IG (You may click on on it for a bigger picture)

Bullish sign for GBP/JPY

The figures present 28.72% of merchants are net-long GBP/JPY, with the ratio of merchants brief to lengthy at 2.48 to 1. The variety of merchants net-long is 10.45% increased than yesterday however 25.75% decrease than final week, whereas the variety of merchants net-short is 26.38% increased than yesterday and 62.54% increased than final week.

Right here at DailyFX, we usually take a contrarian view to crowd sentiment, and the very fact merchants are net-short suggests GBP/JPY costs might proceed to rise.Merchants are additional net-short than yesterday and final week, and the mixture of present sentiment and up to date modifications offers us a stronger GBP/JPY-bullish contrarian buying and selling bias.

On this webinar, I regarded on the developments within the main forex, commodity and inventory markets, on the forward-looking knowledge on the financial calendar this week, on the IG Shopper Sentiment web page on the DailyFX web site, and on the IG Shopper Sentiment studies that accompany it.

— Written by Martin Essex, Analyst

Be happy to contact me on Twitter @MartinSEssex


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